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Mod 8(c) - CH 8 EXERCISES/PROBLEMS (68 pts)

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Recording Payroll and Payroll Taxes

The following information about the payroll for the week ended October 4 was obtained from the records of Simkins Mining Co.:

Salaries:				Deductions:
Sales salaries		$30,000		Income tax withheld		$17,000
Employee Wages		40,000		U.S. savings bonds		2,000
Office salaries		20,000		Group insurance		6,000
		$90,000

Tax rates assumed:

FICA tax, 7.5% of employee annual earnings

State unemployment (employer only), 4.2%

Federal unemployment (employer only), 0.8%

Instructions:

1. For the October 4 payroll, determine the employee FICA tax payable.
$

2. Illustrate the effect on the accounts and financial statements of recording the October 4 payroll. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.

Statement of Cash Flows

Balance Sheet

Assets

=

Liabilities

+

Stockholders' Equity

=

+

+

+

+

+

October 4.

Statement of Cash Flows

Income Statement

3. Determine the following amounts for the employer payroll taxes related to the October 4 payroll: (a) FICA tax payable, (b) state unemployment tax payable, and (c) federal unemployment tax payable.

a. FICA tax payable	$
b. State unemployment tax payable	$
c. Federal unemployment tax payable	$

4. Illustrate the effect on the accounts and financial statements of recording the liability for the October 4 employer payroll taxes. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.

Statement of Cash Flows	Balance Sheet
	Assets	=	Liabilities					+	Stockholders' Equity
		=		+		+		+
October 4.
Statement of Cash Flows									Income Statement

3 more Check My Work uses remaining.

Answer 1

1. 58,250

Workings:

Sales salaries	30,000.00
Employee Wages	40,000.00
Office salaries	20,000.00
Total salaries	90,000.00
Income tax withheld Payable	17,000.00
U.S. savings bonds Payable	2,000.00
Group insurance	6,000.00
FICA Tax Payable	6,750.00
Salary Payable	58,250.00

2
Balance Sheet
Assets	=	Liabilities					+	Stockholders' Equity
No Effect		17,000.00	2,000.00	6,000.00	6,750.00	58,250.00		(90,000.00)

Statement of Cashflow

No Effect

Income Statement
Sales salaries	30,000.00
Employee Wages	40,000.00
Office salaries	20,000.00

3
FICA tax payable	6,750.00
State unemployment tax payable	3,780.00
Federal unemployment tax payable	720.00
Payroll Tax Expenses	11,250.00

4
Balance Sheet
Assets	=	Liabilities			+	Stockholders' Equity
No Effect	No effect	6,750.00	3,780.00	720.00		(11,250.00)

Cash Flow

No Effect

Income Statement
Payroll Tax Expenses	11,250.00

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