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Business Accounting Financial Accounting: Information for Decisions

Employer Payroll tax expense: Apart from Gross salaries which are being offered to the employees, the employers are also required to contribute towards the taxes to the Federal and state. The FICA social security tax and Medicare tax need to be equally contributed by the employer upto the threshold limit. Apart from these taxes, the unemployment tax both for Federal and State need to be contributed by the employer till the salaries of each particular employee does not reach the threshold limit. Employee tax withheld: While paying the gross salaries, the FICA Social security tax and FICA Medicare tax as contributed by employer is also deducted from the gross salaries of employees. Also, the deduction in respect of Federal Income tax if applicable on employee is also deducted from its gross salaries to arrive at the net salaries so paid to the employees. All these deductions of taxes made and own contribution of taxes by the employer is made payable by the employer. To prepare: The Journal entries for payment of payroll expenses. Journal Entries S. No. Particulars Debit ($) Credit ($) a. Sales salaries expense Office salaries expense Federal income tax payable State income tax payable FICA Social security tax payable FICA Medicare tax payable Medical insurance payable Life insurance payable Union dues payable Salaries payable (To record accrued salaries for the month of July.) 200,000 160,000 90,000 20,000 22,320 5,220 2,800 1,600 1,000 217,060 b. Salaries payable Cash (To record the payment of net salaries payable.) 217,060 217,060 c. Payroll tax expenses FICA Social security tax payable FICA Medicare tax payable Federal unemployment tax payable State unemployment tax payable (To record employers accrued payroll taxes.) 30,540 22,320 5,220 300 2,700 d. FICA Social security tax payable FICA Medicare tax payable Federal unemployment tax payable State unemployment tax payable Medical insurance payable Life insurance payable Union dues payable Federal tax payable Cash (To record the payment made towards payroll liabilities.) 44,640 10,440 300 22,700 2,800 1,600 1,000 90,000 173,480 The explanations of the entries are as under: The Gross salaries after deducting the FICA social security and Medicare tax of equal amount as contributed by the employer and also the federal tax liability of the employee has been paid by debiting the salaries expense and credit to be made of Cash account for the net amount paid and recognizing the taxes deducted as liability.The other deductions as Union dues payable, insurance premiums payable are also deducted from the gross salaries to arrive at the net salaries payable and such deductions has been credited and taken as liabilities. The net salaries so payable is computed as under: Particulars Sub-total ($) Total ($) Sales Salaries 200,000 Office salaries 160,000 360,000 Less: Amount withheld Federal income tax (90,000) State income tax (20,000) Social security tax (22,320) Medicare tax (5,220) Union dues (1,000) Medical insurance (40% of $7,000) (2,800) Life insurance (40% of $4,000) (1,600) (142,940) Salaries payable 217,060 The salaries payable computed above is considered as a liability until paid. Now, it is being paid so salaries payable and cash both will decrease. Thus, salaries payable would be debited and cash would be credited. Payroll tax expenses shall be debited for the total amount of taxes to be contributed by the employer and the credit shall be made to respective tax liabilities. The total of employer payroll tax expenses has been computed as under: Tax Payable applicable Tax rate (%) Tax amount ($) FICA Social security tax Given 22,320 FICA Medicare tax Given 5,220 Federal Unemployment tax 50,000 0.60% 2,700 State Unemployment tax 50,000 5.40% 300 Employer’s payroll liability 30,540 The total of taxes so deducted and contributed in the above two steps shall be paid off by debiting the respective liabilities and credit shall be made to Cash account.

Employer Payroll tax expense: Apart from Gross salaries which are being offered to the employees, the employers are also required to contribute towards the taxes to the Federal and state. The FICA social security tax and Medicare tax need to be equally contributed by the employer upto the threshold limit. Apart from these taxes, the unemployment tax both for Federal and State need to be contributed by the employer till the salaries of each particular employee does not reach the threshold limit. Employee tax withheld: While paying the gross salaries, the FICA Social security tax and FICA Medicare tax as contributed by employer is also deducted from the gross salaries of employees. Also, the deduction in respect of Federal Income tax if applicable on employee is also deducted from its gross salaries to arrive at the net salaries so paid to the employees. All these deductions of taxes made and own contribution of taxes by the employer is made payable by the employer. To prepare: The Journal entries for payment of payroll expenses. Journal Entries S. No. Particulars Debit ($) Credit ($) a. Sales salaries expense Office salaries expense Federal income tax payable State income tax payable FICA Social security tax payable FICA Medicare tax payable Medical insurance payable Life insurance payable Union dues payable Salaries payable (To record accrued salaries for the month of July.) 200,000 160,000 90,000 20,000 22,320 5,220 2,800 1,600 1,000 217,060 b. Salaries payable Cash (To record the payment of net salaries payable.) 217,060 217,060 c. Payroll tax expenses FICA Social security tax payable FICA Medicare tax payable Federal unemployment tax payable State unemployment tax payable (To record employers accrued payroll taxes.) 30,540 22,320 5,220 300 2,700 d. FICA Social security tax payable FICA Medicare tax payable Federal unemployment tax payable State unemployment tax payable Medical insurance payable Life insurance payable Union dues payable Federal tax payable Cash (To record the payment made towards payroll liabilities.) 44,640 10,440 300 22,700 2,800 1,600 1,000 90,000 173,480 The explanations of the entries are as under: The Gross salaries after deducting the FICA social security and Medicare tax of equal amount as contributed by the employer and also the federal tax liability of the employee has been paid by debiting the salaries expense and credit to be made of Cash account for the net amount paid and recognizing the taxes deducted as liability.The other deductions as Union dues payable, insurance premiums payable are also deducted from the gross salaries to arrive at the net salaries payable and such deductions has been credited and taken as liabilities. The net salaries so payable is computed as under: Particulars Sub-total ($) Total ($) Sales Salaries 200,000 Office salaries 160,000 360,000 Less: Amount withheld Federal income tax (90,000) State income tax (20,000) Social security tax (22,320) Medicare tax (5,220) Union dues (1,000) Medical insurance (40% of $7,000) (2,800) Life insurance (40% of $4,000) (1,600) (142,940) Salaries payable 217,060 The salaries payable computed above is considered as a liability until paid. Now, it is being paid so salaries payable and cash both will decrease. Thus, salaries payable would be debited and cash would be credited. Payroll tax expenses shall be debited for the total amount of taxes to be contributed by the employer and the credit shall be made to respective tax liabilities. The total of employer payroll tax expenses has been computed as under: Tax Payable applicable Tax rate (%) Tax amount ($) FICA Social security tax Given 22,320 FICA Medicare tax Given 5,220 Federal Unemployment tax 50,000 0.60% 2,700 State Unemployment tax 50,000 5.40% 300 Employer’s payroll liability 30,540 The total of taxes so deducted and contributed in the above two steps shall be paid off by debiting the respective liabilities and credit shall be made to Cash account.

Solution Summary: The author explains that employers are required to contribute towards the taxes to the Federal and state, including the FICA social security tax and Medicare tax.

Financial Accounting: Information for Decisions

Financial Accounting: Information for Decisions

8th Edition

ISBN: 9781259533006

Author: John J Wild

Publisher: McGraw-Hill Education

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Chapter 9, Problem 7E

Chapter 9, Problem 9E

Chapter 9 Solutions

Financial Accounting: Information for Decisions

Ch. 9 - Prob. 1DQ Ch. 9 - Prob. 2DQ Ch. 9 - Prob. 3DQ Ch. 9 - Prob. 4DQ Ch. 9 - What is the combined amount (in percent) of the...Ch. 9 - What is the current Medicare tax rate? This rate...Ch. 9 - Prob. 7DQ Ch. 9 - Prob. 8DQ Ch. 9 - Prob. 9DQ Ch. 9 - Why are warranty liabilities usually recognized on...

Ch. 9 - Prob. 11DQ Ch. 9 - Prob. 12DQ Ch. 9 - Prob. 13DQ Ch. 9 - Prob. 14DQ Ch. 9 - Prob. 15DQ Ch. 9 - Prob. 16DQ Ch. 9 - Prob. 17DQ Ch. 9 - Prob. 1QS Ch. 9 - Prob. 2QS Ch. 9 - Ticketsales, Inc., receives $5,000,000 cash in...Ch. 9 - Prob. 4QS Ch. 9 - Prob. 5QS Ch. 9 - Prob. 6QS Ch. 9 - Prob. 7QS Ch. 9 - Prob. 8QS Ch. 9 - Prob. 9QS Ch. 9 - Prob. 10QS Ch. 9 - Prob. 11QS Ch. 9 - Prob. 12QS Ch. 9 - Sera Corporation has made and recorded its...Ch. 9 - Prob. 1E Ch. 9 - Prob. 2E Ch. 9 - Prob. 3E Ch. 9 - Interest-bearing notes payable with year-end...Ch. 9 - Prob. 5E Ch. 9 - Prob. 6E Ch. 9 - Prob. 7E Ch. 9 - Prob. 8E Ch. 9 - Prob. 9E Ch. 9 - Hitzu Co. sold a copier costing $4,800 with a...Ch. 9 - Prob. 11E Ch. 9 - Prob. 12E Ch. 9 - Accounting for contingent liabilities C3 Prepare...Ch. 9 - Prob. 14E Ch. 9 - Prob. 15E Ch. 9 - Prob. 16E Ch. 9 - Prob. 18E Ch. 9 - Prob. 1PSA Ch. 9 - Prob. 2PSA Ch. 9 - Prob. 3PSA Ch. 9 - Prob. 4PSA Ch. 9 - Prob. 5PSA Ch. 9 - Entries for payroll transactions P2 P3 P5...Ch. 9 - Prob. 1PSB Ch. 9 - Prob. 2PSB Ch. 9 - Fishing Guides Co. has four employees. FICA Social...Ch. 9 - Prob. 4PSB Ch. 9 - Shown here are condensed income statements for two...Ch. 9 - Prob. 6PSB Ch. 9 - Prob. 9SP Ch. 9 - Refer to the financial statements of Apple in...Ch. 9 - Key figures for Apple and Google follow. *Apple...Ch. 9 - Prob. 3BTN Ch. 9 - Prob. 5BTN Ch. 9 - Assume that your team is in business and you must...Ch. 9 - Prob. 7BTN Ch. 9 - Prob. 8BTN Ch. 9 - Prob. 9BTN

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On January 21, the column totals of the payroll register for Great Products Company showed that its sales employees had earned 14,960, its truck driver employees had earned 10,692, and its office employees had earned 8,670. Social Security taxes were withheld at an assumed rate of 6.2 percent, and Medicare taxes were withheld at an assumed rate of 1.45 percent. Other deductions consisted of federal income tax, 3,975, and union dues, 560. Determine the amount of Social Security and Medicare taxes withheld and record the general journal entry for the payroll, crediting Salaries Payable for the net pay. All earnings were taxable. Round amounts to the nearest penny.
Total earnings for the employees of Garys Grill for the week ended January 14, 20--, were 6,400. The following payroll taxes were levied on these earnings: Social Security 6.2% Medicare 1.45% FUTA 0.6% SUTA 5.4% Calculate Garys payroll taxes expense for the week ended January 14, 20--.

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