According to a summary of the payroll of Sinclair Company, $505,000 was subject

Question

According to a summary of the payroll of Sinclair Company, $505,000 was subject to the 6.0% social security tax and $545,000 was subject to the 1.5% Medicare tax. Also, $10,000 was subject to state and federal unemployment taxes. Calculate the employer's payroll taxes using the following rates: State unemployment. 4.2%; Federal unemployment 0.8%. Journalize the entry to record the accrual of the employer's payroll taxes. The following totals for the month of February were taken from the payroll register of Areon Company: How much is the total payroll expense for Areon Company for this payroll? Assume that the monthly salaries expense remains the same for the entire year and no employees are hired or fired during that time. Based on what you learned in Chapter 10 about payroll taxes, do you expect the total payroll expense to stay the same every month? Explain.

Explanation / Answer

a) unemployment tax = 10,000 @4.2%   = $420

Federal unemployment 10,000@.8%     =    80

Journal entry

2)   total payroll expense

b)No payroll expenses will not stay same as salaries which are subject to unemploymnet taxes will be zero soon.

Payroll tax expense $38,975 Social security tax( 505,000 @6%) $30,300 Medicate tax (515,000@1.5%)     8,175 State unemployment tax payable         420 Federal unemployment tax payable           80

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