Lee Financial Services pays employees monthly. Payroll information is listed bel

Question

Lee Financial Services pays employees monthly. Payroll information is listed below for January 2013, the first month of Lee's fiscal year. Assume that none of the employees exceeded any relevant wage base.

Required:

Complete the following table to calculate the taxes withheld from the employee and the employer.

Prepare the appropriate journal entries to record salaries and wages expense and payroll tax expense for the January 2013 pay period. (If no entry is required for a particular event, select "No journal entry required" in the first account field.)

1. Record salaries and wage expense for January 2013 pay period.

2. Record payroll expense for January 2013 pay period.

     Salaries $ 490,000   Federal income taxes to be withheld 98,000   Federal unemployment tax rate 0.60 %   State unemployment tax rate (after FUTA deduction) 5.40 %   Social security tax rate 6.20 %   Medicare tax rate 1.45 %

Explanation / Answer

Answer:

Salaries and wages expense (total amount earned) A/C Dr. $490,000

To Withholding taxes payable (federal income tax) A/C $98,000

To Social security taxes payable ($490,000 x 6.2%) A/C $30,380

To Medicare taxes payable ($490,000 x 1.45%) A/C $7,105

To Salaries and wages payable (net pay) A/C $354,515

Payroll tax expense (total) A/C Dr. $66,885

To Social security taxes payable (employer’s matching amount) A/C $30,380

To Medicare taxes payable (employer’s matching amount)A/C $7,105

To Federal unemployment tax payable ($490,000 x 0.6%) $2,940

To State unemployment tax payable ($490,000 x 5.4%) $26,460

Tax Amount withheld from employees gross pay Amount paid by employer Federal income taxes to be withheld 98000 0 Social Security (6.2%) 30380 30380 Medicare (1.45%) tax rate 7105 7105 Federal unemployment tax 0 2940 State unemployment tax 0 26460 Total 135485 66885

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