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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

CALCULATING PAYROLL TAXES EXPENSE AND PREPARING JOURNAL ENTRY Selected information from the payroll register of Ebeling’s Dairy for the week ended July 7, 20--, is shown below. The SUTA tax rate is 5.4%, and the FUTA tax rate is 0.6%, both on the first $7,000 of earnings. Social Security tax on the employer is 6.2% on the first $128,400 of earnings, and Medicare tax is 1.45% on gross earnings.

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REQUIRED

  1. 1. Calculate the total employer payroll taxes for these employees.
  2. 2. Prepare the journal entry to record the employer payroll taxes as of July 7, 20--.

1.

To determine

Calculate the total employer payroll taxes for these employees.

Explanation

Payroll tax:

Payroll tax refers to the tax that are equally contributed by employees and employer based on the salary and wages of an employee. Payroll tax includes taxes like federal tax, local income tax, state tax, social security tax and federal and state unemployment tax.

Calculate the total employer payroll taxes for these employees.

(Figure 1)

Therefore, the amount of taxable earnings for the employees is $669.32

Working Notes:

(1) Calculate the Unemployment compensation for Employee CK.

Unemployment Compensation for Employee CK}=(First earnings for umemployment tax)(Cumulative pay before current earnings)=$7,000$6,650=$350

(2) Calculate the Unemployment compensation for Employee CM.

Unemployment Compensation for Employee CM}=(First earnings for umemployment tax)(Cumulative pay before current earnings)=$7,000$6,370=$630

(3) Calculate the Unemployment compensation for Employee LM

2.

To determine

Prepare the journal entry to record the employer payroll taxes as of July 7, 20--.

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