Question

The payroll of Flint Company for September 2016 is as follows. Total payroll was $484,000, of which $100,000 is exempt from Social Security tax because it represented amounts paid in excess of $118,500 to certain employees. The amount paid to employees in excess of $7,000 was $373,000. Income taxes in the amount of $86,700 were withheld, as was $8,700 in union dues. The state unemployment tax is 3.5%, but Flint 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 $118,500 and 1.45% in excess of $118,500. No employee for Flint makes more than $125,000. The federal unemployment tax rate is 0.8% after state credit. Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are recorded separately. (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.) Account Titles and Explanation Debit Credit (To record wages and salaries paid) (To record employer payroll taxes)

Answer 1

SOLUTION

S.No.	Account titles and explanation	Debit ($)	Credit ($)
1.	Salaries and Wages Expense	484,000
	Withholding Taxes Payable		86,700
	FICA Taxes Payable {[($484,000-$100,000)*7.65%] + ($100,000 * 1.45%)}		30,826
	Union dues payable		8,700
	Cash		357,774
	(To record the wages and salaries paid)
2.	Payroll Tax Expense	32,560
	FICA Taxes Payable		30,826
	FUTA Taxes Payable ($86,700 * 0.8%)		694
	SUTA Taxes Payable ($86,700 * 1.2%)		1,040
	(To record the employer payroll taxes)