The payroll of YellowCard Company for September 2013 is as follows. Total payrol

Question

The payroll of YellowCard Company for September 2013 is as follows. Total payroll was $470,400, of which $153,700 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 $391,700. Income taxes in the amount of $88,780 were withheld, as was $8,830 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 (5 lines) and (b) the employer payroll taxes are recorded separately (4 lines).

(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.) No. Account Titles and Explanation Debit Credit (a) (b)

Explanation / Answer

a)

To record the pay roll expense the entry is as follows:

Account Titles & Explanation

Debit($)

Credit($)

Salary Expense

470,400

Withholding Taxes Payable

88,780

Union dues payable

8,830

FICA Taxes Payable

24,228

Cash

348,562

b)

Employer payroll tax entry is as follows:

Account Titles & Explanation

Debit($)

Credit($)

Employer Payroll Tax Entry

Payroll Tax Expense

25,802

FICA Taxes Payable

24,228

State Unemployment Taxes Payable

944

Federal Unemployment Taxes Payable

630

Working note:

FICA Tax = (470,400-153,700)*7.65%

                 =24,228

State unemployment tax

= (470,400 - 391,700)*(3.5% - 2.3%)

= 944

Federal unemployment taxes payable:

= (470,400 - 391,700)*0.8%

= 630

Account Titles & Explanation

Debit($)

Credit($)

Salary Expense

470,400

Withholding Taxes Payable

88,780

Union dues payable

8,830

FICA Taxes Payable

24,228

Cash

348,562

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