An employee earns $50 per hour and 2 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 50 hours during the week

An employee earns $50 per hour and 2 times that rate for all hours in excess of 40 hours per week. Assume that the employee worked 50 hours during the week. Assume further that the social security tax rate was 6.0%, the Medicare tax rate was 1.5%, and federal income tax to be withheld was $686.

a. Determine the gross pay for the week.
b. Determine the net pay for the week.


Answer:











a. Regular pay (40 hrs. × $50)…………………………………………… $2,000
Overtime pay (10 hrs. × $100)………………………………………… 1,000
Gross pay……………………………………………………………… $3,000
b. Gross pay……………………………………………………………… $3,000
Less: Social security tax (6% × $3,000)…………………………… $180
Medicare tax (1.5% × $3,000)……………………………… 45
Federal withholding………………………………………… 686 911
Net pay…………………………………………………………………… $2,089

According to a summary of the payroll of Bailik Co., $880,000 was subject to the 6.0% social security tax and the 1.5% Medicare tax

According to a summary of the payroll of Bailik Co., $880,000 was subject to the 6.0% social security tax and the 1.5% Medicare tax. Also, $40,000 was subject to state and federal unemployment taxes.

a. Calculate the employer’s payroll taxes, using the following rates: state unemployment, 5.4%; federal unemployment, 0.8%.
b. Journalize the entry to record the accrual of payroll taxes.


Answer:













a. Social security tax (6% × $880,000)………………………………………………… $52,800
Medicare tax (1.5% × $880,000)……………………………………………………… 13,200
State unemployment tax (5.4% × $40,000)………………………………………… 2,160
Federal unemployment (0.8% × $40,000)………………………………………… 320
$68,480
b.
 Payroll Tax Expense 68,480
Social Security Tax Payable 52,800
Medicare Tax Payable 13,200
State Unemployment Tax Payable 2,160
Federal Unemployment Tax Payable 320

Ehrlich Co. began business on January 2, 2013. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax

Ehrlich Co. began business on January 2, 2013. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 2014, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees’ earnings records were inadvertently destroyed.

None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5%. Data on dates of employment, salary rates, and employees’ income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records:

















Employee
Date First
Employed
Monthly
Salary
Monthly
Income Tax
Withheld
Arnett Nov. 16 $ 5,500 $1,008
Cruz Jan. 2 4,800 833
Edwards Oct. 1 8,000 1,659
Harvin Dec. 1 6,000 1,133
Nicks Feb. 1 10,000 2,219
Shiancoe Mar. 1 11,600 2,667
Ward Nov. 16 5,220 938




Instructions
1. Calculate the amounts to be reported on each employee’s Wage and Tax Statement (Form W-2) for 2013, arranging the data in the following form:






Employee
Gross
Earnings
Federal Income
Tax Withheld
Social Security
Tax Withheld
Medicare
Tax Withheld

2. Calculate the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee’s earnings; (d) federal unemployment compensation at 0.8% on the first $10,000 of each employee’s earnings; (e) total.


Answer:




















1. Gross Federal Income Social Security Medicare
Employee Earnings Tax Withheld Tax Withheld Tax Withheld
Arnett………………… $ 8,250.00 $ 1,512.00 $ 495.00 $ 123.75
Cruz…………………… 57,600.00 9,996.00 3,456.00 864.00
Edwards……………… 24,000.00 4,977.00 1,440.00 360.00
Harvin………………… 6,000.00 1,133.00 360.00 90.00
Nicks………………… 110,000.00 24,409.00 6,600.00 1,650.00
Shiancoe……………… 116,000.00 26,670.00 6,960.00 1,740.00
Ward………………… 7,830.00 1,407.00 469.80 117.45
$19,780.80 $4,945.20
2. a. Social security tax paid by employer......................................................... $19,780.80
b. Medicare tax paid by employer................................................................... 4,945.20
c. Earnings subject to unemployment compensation tax,
$10,000 for all employees except Arnett, Harvin, and Ward.
Thus, total earnings subject to SUTA and FUTA are
$62,080 [(4 × $10,000) + $8,250 + $6,000 + $7,830].
State unemployment compensation tax: $62,080 × 5.4% ........................ 3,352.32
d. Federal unemployment compensation tax: $62,080 × 0.8%………………… 496.64
e. Total payroll tax expense ............................................................................ $28,574.96

The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year:

The following accounts, with the balances indicated, appear in the ledger of Garcon Co. on December 1 of the current year:











211 Salaries Payable — 218 Bond Deductions Payable $ 3,400
212 Social Security Tax Payable $ 9,273 219 Medical Insurance Payable 27,000
213 Medicare Tax Payable 2,318 411 Operations Salaries Expense 950,000
214 Employees Federal Income Tax Payable 15,455 511 Officers Salaries Expense 600,000
215 Employees State Income Tax Payable 13,909 512 Office Salaries Expense 150,000
216 State Unemployment Tax Payable 1,400 519 Payroll Tax Expense 137,951
217 Federal Unemployment Tax Payable 500



The following transactions relating to payroll, payroll deductions, and payroll taxes occurred during December:

Dec. 2. Issued Check No. 410 for $3,400 to Jay Bank to purchase U.S. savings bonds for employees.
2. Issued Check No. 411 to Jay Bank for $27,046 in payment of $9,273 of social security tax, $2,318 of Medicare tax, and $15,455 of employees’ federal income tax due.
13. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:





















Salary distribution:
Operations $43,200
Officers 27,200
Office 6,800 $77,200
Deductions:
Social security tax $ 4,632
Medicare tax 1,158
Federal income tax withheld 15,440
State income tax withheld 3,474
Savings bond deductions 1,700
Medical insurance deductions 4,500 30,904
Net amount $46,296






Dec. 13. Issued Check No. 420 in payment of the net amount of the biweekly payroll.
13. Journalized the entry to record payroll taxes on employees’ earnings of December
13: social security tax, $4,632; Medicare tax, $1,158; state unemployment tax, $350; federal unemployment tax, $125.
16. Issued Check No. 424 to Jay Bank for $27,020, in payment of $9,264 of social security tax, $2,316 of Medicare tax, and $15,440 of employees’ federal income tax due.
19. Issued Check No. 429 to Sims-Walker Insurance Company for $31,500 in payment of the semiannual premium on the group medical insurance policy.
27. Journalized the entry to record the biweekly payroll. A summary of the payroll record follows:




















Salary distribution:
Operations $42,800
Officers 28,000
Office 7,000 $77,800
Deductions:
Social security tax $ 4,668
Medicare tax 1,167
Federal income tax withheld 15,404
State income tax withheld 3,501
Savings bond deductions 1,700 26,440
Net amount $51,360








27. Issued Check No. 541 in payment of the net amount of the biweekly payroll.
27. Journalized the entry to record payroll taxes on employees’ earnings of December
27: social security tax, $4,668; Medicare tax, $1,167; state unemployment tax, $225; federal unemployment tax, $75.
27. Issued Check No. 543 for $20,884 to State Department of Revenue in payment of employees’ state income tax due on December 31.
31. Issued Check No. 545 to Jay Bank for $3,400 to purchase U.S. savings bonds for employees.
31. Paid $45,000 to the employee pension plan. The annual pension cost is $60,000. (Record both the payment and unfunded pension liability.)


Instructions
1. Journalize the transactions.
2. Journalize the following adjusting entries on December 31:
a. Salaries accrued: operations salaries, $8,560; officers salaries, $5,600; office salaries, $1,400. The payroll taxes are immaterial and are not accrued.
b. Vacation pay, $15,000.


Answer:




























































1. Dec. 2 Bond Deductions Payable 3,400
Cash 3,400
2 Social Security Tax Payable 9,273
Medicare Tax Payable 2,318
Employees Federal Income Tax Payable 15,455
Cash 27,046
13 Operations Salaries Expense 43,200
Officers Salaries Expense 27,200
Office Salaries Expense 6,800
Social Security Tax Payable 4,632
Medicare Tax Payable 1,158
Employees Federal Income Tax Payable 15,440
Employees State Income Tax Payable 3,474
Bond Deductions Payable 1,700
Medical Insurance Payable 4,500
Salaries Payable 46,296
13 Salaries Payable 46,296
Cash 46,296
13 Payroll Tax Expense 6,265
Social Security Tax Payable 4,632
Medicare Tax Payable 1,158
State Unemployment Tax Payable 350
Federal Unemployment Tax Payable 125
16 Social Security Tax Payable 9,264
Medicare Tax Payable 2,316
Employees Federal Income Tax Payable 15,440
Cash 27,020
19 Medical Insurance Payable 31,500
Cash 31,500

Dec. 27 Operations Salaries Expense 42,800
Officers Salaries Expense 28,000
Office Salaries Expense 7,000
Social Security Tax Payable 4,668
Medicare Tax Payable 1,167
Employees Federal Income Tax Payable 15,404
Employees State Income Tax Payable 3,501
Bond Deductions Payable 1,700
Salaries Payable 51,360
27 Salaries Payable 51,360
Cash 51,360
27 Payroll Tax Expense 6,135
Social Security Tax Payable 4,668
Medicare Tax Payable 1,167
State Unemployment Tax Payable 225
Federal Unemployment Tax Payable 75
27 Employees State Income Tax Payable 20,884
Cash 20,884
31 Bond Deductions Payable 3,400
Cash 3,400
31 Pension Expense 60,000
Cash 45,000
Unfunded Pension Liability 15,000
To record pension cost and unfunded
liability.
2. a. Dec. 31 Operations Salaries Expense 8,560
Officers Salaries Expense 5,600
Office Salaries Expense 1,400
Salaries Payable 15,560
Accrued wages for the period.
b. 31 Vacation Pay Expense 15,000
Vacation Pay Payable 15,000
Vacation pay accrued for the period.

Jocame Inc. began business on January 2, 2013. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax

Jocame Inc. began business on January 2, 2013. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 2014, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees’ earnings records were inadvertently destroyed.

None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5% on salary. Data on dates of employment, salary rates, and employees’ income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records:















Employee
Date First
Employed
Monthly
Salary
Monthly
Income Tax
Withheld
Addai July 16 $ 8,160 $1,704
Kasay June 1 3,600 533
McGahee Feb. 16 6,420 1,238
Moss Jan. 1 4,600 783
Stewart Dec. 1 4,500 758
Tolbert Nov. 16 3,250 446
Wells May 1 10,500 2,359


Instructions
1. Calculate the amounts to be reported on each employee’s Wage and Tax Statement (Form W-2) for 2013, arranging the data in the following form:






Employee
Gross
Earnings
Federal Income
Tax Withheld
Social Security
Tax Withheld
Medicare
Tax Withheld

2. Calculate the following employer payroll taxes for the year: (a) social security; (b)  Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee’s earnings; (d) federal unemployment compensation at 0.8% on the first $10,000 of each employee’s earnings; (e) total.


Answer:























1. Gross Federal Income Social Security Medicare
Employee Earnings* Tax Withheld Tax Withheld Tax Withheld
Addai…………………… $44,880 $ 9,372 $ 2,692.80 $ 673.20
Kasay………………… 25,200 3,731 1,512.00 378.00
McGahee……………… 67,410 12,999 4,044.60 1,011.15
Moss…………………… 55,200 9,396 3,312.00 828.00
Stewart……………… 4,500 758 270.00 67.50
Tolbert………………… 4,875 669 292.50 73.13
Wells………………… 84,000 18,872 5,040.00 1,260.00
$17,163.90 $4,290.98
* The gross earnings are determined by multiplying the monthly earnings by the
number of months of employment based on the date of hire.
2. a. Social security tax paid by employer……………………………………… $17,163.90
b. Medicare tax paid by employer……………………………………………… 4,290.98
c. Earnings subject to unemployment compensation tax,
$10,000 for all employees except Stewart and Tolbert.
Thus, total earnings subject to SUTA and FUTA are
$59,375 [(5 × $10,000) + $4,500 + $4,875].
State unemployment compensation tax: $59,375 × 5.4%……………… 3,206.25
d. Federal unemployment compensation tax: $59,375 × 0.8%…………… 475.00
e. Total payroll tax expense…………………………………………………… $25,136.13