The payroll of Flint Company for September 2016 is as follows. Total payroll was

Question

The payroll of Flint Company for September 2016 is as follows. Total payroll was $484,000, of which $100,000 is exempt from Social Security tax because it represented amounts paid in excess of $118,500 to certain employees. The amount paid to employees in excess of $7,000 was $373,000. Income taxes in the amount of $86,700 were withheld, as was $8,700 in union dues. The state unemployment tax is 3.5%, but Flint 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 $118,500 and 1.45% in excess of $118,500. No employee for Flint makes more than $125,000. The federal unemployment tax rate is 0.8% after state credit. Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are recorded separately. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts .Credit account titles are automatically indented when amount is entered. Do not indent manually.) Account Titles and Explanation Debit Credit (To record wages and salaries paid) (To record employer payroll taxes)

Explanation / Answer

SOLUTION

S.No. Account titles and explanation Debit ($) Credit ($) 1. Salaries and Wages Expense 484,000 Withholding Taxes Payable 86,700 FICA Taxes Payable {[($484,000-$100,000)*7.65%] + ($100,000 * 1.45%)} 30,826 Union dues payable 8,700 Cash 357,774 (To record the wages and salaries paid) 2. Payroll Tax Expense 32,560 FICA Taxes Payable 30,826 FUTA Taxes Payable ($86,700 * 0.8%) 694 SUTA Taxes Payable ($86,700 * 1.2%) 1,040 (To record the employer payroll taxes)

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