The payroll of YellowCard Company for September 2013 is as follows. Total payrol
ID: 2486585 • Letter: T
Question
The payroll of YellowCard Company for September 2013 is as follows.
Total payroll was $488,800, of which $134,600 is exempt from Social Security tax because it represented amounts paid in excess of $106,800 to certain employees. The amount paid to employees in excess of $7,000 was $394,700. Income taxes in the amount of $84,180 were withheld, as was $8,690 in union dues. The state unemployment tax is 3.5%, but YellowCard Company is allowed a credit of 2.3% by the state for its unemployment experience. Also, assume that the current FICA tax is 7.65% on an employee’s wages to $106,800 and 1.45% in excess of $106,800. No employee for YellowCard makes more than $125,000. The federal unemployment tax rate is 0.8% after state credit.
Prepare the necessary journal entries if (a) the wages and salaries paid and (b) the employer payroll taxes are recorded separately.
Explanation / Answer
Answer:
To calculate FICA taxes payable:
$488800 (payroll) - $134600(SS tax exempt amount) *7.65% (FICA tax rate) = $27096.3
$134600 (amount paid in excess of $106800) * 1.45% (tax rate in excess of $106800) = $1951.7
Total = $27096.3+ $1951.7= $29048
Journal entries:
a) Salaries and wages expense Dr. 488800
To Withholding taxes payable.......................84180 (given)
To FICA taxes payable................................29048 (see above)
To union dues payable.................................8690(given)
To cash.......................................................366882 (plug)
b) Payroll tax expense Dr. 30930
To FICA taxes payable................................29048
To Federal unemployment tax payable..........752.8 [(488800 - 394700)*0.8%]
To state unemployment tax payable.............1129.2[(488800 - 394700)*(3.5% - 2.3%)]
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