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)………………………………………………… $52,800Medicare tax (1.5% × $880,000)……………………………………………………… 13,200State unemployment tax (5.4% × $40,000)………………………………………… 2,160Federal unemployment (0.8% × $40,000)………………………………………… 320$68,480b. Payroll Tax Expense 68,480Social Security Tax Payable 52,800Medicare Tax Payable 13,200State Unemployment Tax Payable 2,160Federal Unemployment Tax Payable 320
Widmer Company had gross wages of $240,000 during the week ended June 17. The amount of wages subject to social security tax was $240,000, while the amount of wages subject to federal and state unemployment taxes was $35,000. Tax rates are as follows:
Social security 6.0%Medicare 1.5%State unemployment 5.4%Federal unemployment 0.8%The total amount withheld from employee wages for federal taxes was $48,000.a. Journalize the entry to record the payroll for the week of June 17.b. Journalize the entry to record the payroll tax expense incurred for the week of June 17.Answer:
a. Wages Expense 240,000Social Security Tax Payable* 14,400Medicare Tax Payable** 3,600Employees Federal Income Tax Payable 48,000Wages Payable 174,000* 6.0% × $240,000** 1.5% × $240,000b. Payroll Tax Expense 20,170Social Security Tax Payable 14,400Medicare Tax Payable 3,600State Unemployment Tax Payable* 1,890Federal Unemployment Tax Payable** 280* 5.4% × $35,000** 0.8% × $35,000
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
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:
EmployeeDate FirstEmployedMonthlySalaryMonthlyIncome TaxWithheldAddai July 16 $ 8,160 $1,704Kasay June 1 3,600 533McGahee Feb. 16 6,420 1,238Moss Jan. 1 4,600 783Stewart Dec. 1 4,500 758Tolbert Nov. 16 3,250 446Wells May 1 10,500 2,359Instructions1. 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:
EmployeeGrossEarningsFederal IncomeTax WithheldSocial SecurityTax WithheldMedicareTax Withheld2. 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 MedicareEmployee Earnings* Tax Withheld Tax Withheld Tax WithheldAddai…………………… $44,880 $ 9,372 $ 2,692.80 $ 673.20Kasay………………… 25,200 3,731 1,512.00 378.00McGahee……………… 67,410 12,999 4,044.60 1,011.15Moss…………………… 55,200 9,396 3,312.00 828.00Stewart……………… 4,500 758 270.00 67.50Tolbert………………… 4,875 669 292.50 73.13Wells………………… 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 thenumber of months of employment based on the date of hire.2. a. Social security tax paid by employer……………………………………… $17,163.90b. Medicare tax paid by employer……………………………………………… 4,290.98c. 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%……………… 3,206.25d. Federal unemployment compensation tax: $59,375 × 0.8%…………… 475.00e. Total payroll tax expense…………………………………………………… $25,136.13
