P13-4 (Payroll Tax Entries) Below is a payroll sheet for Otis Import Company for the month of September 2012.

The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is $7,000. Assume a 10% federal income tax rate for all employees and a 7.65% FICA tax on employee and employer on a maximum of $106,800. In addition, 1.45% is charged both employer and employee for an employee’s wages in excess of $106,800 per employee.

Name	Earnings to Aug. 31	September Earnings	Income Tax Withholding	FICA	State U.C.	Federal U.C.
B. D. Williams	$6,800	$800
D. Raye	6,500	700
K. Baker	7,600	1,100
F. Lopez	13,600	1,900
A. Daniels	107,000	13,000
B. Kingston	112,000	16,000
Total	$253,500	$33,500

Instructions

1. Complete the payroll sheet and make the necessary entry to record the payment of the payroll.
2. Make the entry to record the payroll tax expenses of Otis Import Company.
3. Make the entry to record the payment of the payroll liabilities created. Assume that the company pays all payroll liabilities at the end of each month.

Solution

Test