Assume that the federal income tax withheld is 10% of wages. Union dues withheld are 2% of wages. Vacations are taken the second and third weeks of August by Robbins, Kirk, and Sprouse. The state unemployment tax rate is 2.5% and the federal is 0.8%, both on a $7,000 maximum. The FICA rate is 7.65% on employee and employer on a maximum of $113,700 per employee. In addition, a 1.45% rate is charged both employer and employee for an employee’s wages in excess of $113,700.
Instructions
Make the journal entries necessary for each of the four August payrolls. The entries for the payroll and for the company’s liability are made separately. Also make the entry to record the monthly payment of accruedpayroll liabilities.
Solution
Entries for Payroll 1
(D) Wages and Salaries Expense = 1,040.00*
(C) Withholding Taxes Payable (10% X $1,040)* = 104.00
(C) Social Security Taxes Payable (8% X $1,040) = 83.20
(C) Union Dues Payable (2% X $1,040) = 20.80
(C) Cash = 832.00
*$200 + $150 + $110 + $250 + $330 = $1,040
(D) Payroll Tax Expense = 83.20
(C) Social Security Taxes Payable (8% X $1,040) = 83.20
Entries for Payroll 2 and 3
(D) Vacation Wages Payable = 590.00*
(D) Wages and Salaries Expense = 450.00
(C) Withholding Taxes Payable (10% X $1,040) = 104.00
(C) Social Security Taxes Payable (8% X $1,040) = 83.20
(C) Union Dues Payable (2% X $1,040) = 20.80
(C) Cash = 832.00
*($300 + $220 + $660) ÷ 2
(D) Payroll Tax Expense = 83.20
(C) Social Security Taxes Payable (8% X $1,040) = 83.20
Entries for Payroll 4
(D) Wages and Salaries Expense = 1,040.00
(C) Withholding Taxes Payable (10% X $1,040) = 104.00
(C) Social Security Taxes Payable (8% X $1,040) = 83.20
(C) Union Dues Payable (2% X $1,040) = 20.80
(C) Cash = 832.00
(D) Payroll Tax Expense = 83.20
(C) Social Security Taxes Payable (8% X $1,040) = 83.20
Monthly Payment of Payroll Liabilities
(D) Withholding Taxes Payable ($104.00 X 4) = 416.00
(D) Social Security Taxes Payable ($83.20 X 8) = 665.60
(D) Union Dues Payable ($20.80 X 4) = 83.20
(C) Cash = 1,164.80