Question

According to a summary of the payroll of Sinclair Company, $545,000 was subject to the 6.0% social security tax and the 1.5% Medicare tax. Also, $10,000 was subject to state and federal unemployment taxes.

Required:

(a) Calculate the employer’s payroll taxes using the following rates: State unemployment, 4.2%; Federal unemployment, 0.8%.

(b) Journalize the entry to record the accrual of the employer's payroll taxes. Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS

Sinclair Company

General Ledger

ASSETS

110 Cash

111 Accounts Receivable

112 Interest Receivable

113 Notes Receivable

115 Inventory

116 Supplies

118 Prepaid Insurance

120 Land

123 Building

124 Accumulated Depreciation-Building

125 Office Equipment

126 Accumulated Depreciation-Office Equipment

LIABILITIES

210 Accounts Payable

213 Interest Payable

214 Notes Payable

221 Salaries Payable

222 Social Security Tax Payable

223 Medicare Tax Payable

224 Federal Withholding Tax Payable

225 State Withholding Tax Payable

226 Federal Unemployment Tax Payable

227 State Unemployment Tax Payable

228 State Disability Insurance

231 Medical Insurance Payable

232 Retirement Savings Deductions Payable

233 Union Dues Payable

234 Vacation Pay Payable

235 Unfunded Pension Liability

241 Product Warranty Payable

242 EPA Fines Payable

243 Litigation Claims Payable

EQUITY

310 Common Stock

311 Retained Earnings

312 Dividends

313 Income Summary

REVENUE

410 Sales

610 Interest Revenue

EXPENSES

510 Cost of Merchandise Sold

520 Salaries Expense

525 Delivery Expense

526 Repairs Expense

531 Rent Expense

533 Insurance Expense

534 Supplies Expense

535 Cash Short and Over

536 Product Warranty Expense

541 Vacation Pay Expense

542 Pension Expense

543 Payroll Tax Expense

544 Federal Income Tax Expense

545 State Income Tax Expense

561 Depreciation Expense-Building

562 Depreciation Expense-Office Equipment

570 Damage Awards and Fines

590 Miscellaneous Expense

710 Interest Expense

Calculate the employer’s payroll taxes using the following rates: State unemployment, 4.2%; Federal unemployment, 0.8%.

Employer’s payroll taxes

$

Journalize the entry to record the accrual of the employer's payroll taxes on December 31. Refer to the Chart of Accounts for exact wording of account titles.

PAGE 1

JOURNAL

	DATE	DESCRIPTION	POST. REF.	DEBIT	CREDIT
1
2
3
4
5

Answer 1

a
Social security tax	32700	=545000*6%
Medicare tax	8175	=545000*1.5%
State unemployment tax	420	=10000*4.2%
Federal unemployment tax	80	=10000*0.8%
Employer’s payroll taxes	41375

b

Date	Description	Post. Ref.	Debit	Credit
December 31	Payroll Tax Expense		41375
	Social Security Tax Payable			32700
	Medicare Tax Payable			8175
	State Unemployment Tax Payable			420
	Federal Unemployment Tax Payable			80