Chapter 11: Q20E (page 608)

Question: Recording employee and employer payroll taxes County Company had the following partially completed payroll register:
Earnings Withholdings
Beginning Cumulative Earnings
Current Period Earnings
Ending Cumulative Earnings
OASDI
Medicare
Income
tax
Health
Insurance
United
way
Total
Withholding
Net
pay
Check
No.
Salaries and Wages Expense
$ 77,000
$ 4,500
$ 900
$ 90
$15
801
112,000
7,200
1,200
144
35
802
48,000
3,300
600
66
0
803
61,000
3,300
850
66
20
804
0
4,500
1,100
90
0
805
$298,000
$22,800
$4,650
$456
$70
Requirements
Complete the payroll register. Round to two decimals.
Journalize County Company’s salaries and wages expense accrual for the current pay period.
Journalize County Company’s expenses for employer payroll taxes for the current pay period.
Journalize the payment to employees.
Journalize the payment for withholdings and employer payroll taxes.

Short Answer

Expert verified

Answer

Salaries and wages expense = $22,800
Salaries and wages payable = $15,923
Payroll tax expense =$1,970
Salaries and wages payable = $15,923.2
FICA-OASDI taxes payable = $2740

Step by step solution

Meaning of Payroll

Payroll isthe emolument that a representative gets from his manager for the work he does for the company. It incorporates different remittances and derivations depending on the work of the employee.

(1) Completing payroll register

Earnings			Withholdings
Beginning Cumulative Earnings a	Current Period Earnings b	Ending Cumulative Earnings C=a+b	OASDI d=b 6.2%	Medicare e=b 1.45%	Income Tax f	Health Insurance g	United Way h	Total Withholding I=b+d+e+f+g+h	Net Pay J=b-i	Check No.	Salaries and Wages Expense K=b
$77,000	$4,500	81500	279	65.25	$ 900	$ 90	$15	1349.25	3150.75	801	4500
112,000	7,200	119200	403.0	104.4	1,200	144	35	1886.4	5313.6	802	7200
48,000	3,300	51300	204.6	47.85	600	66	0	918.45	2381.55	803	3300
61,000	3,300	64300	204.6	47.85	850	66	20	1188.45	2111.55	804	3300
0	4,500	4500	279.0	65.25	1,100	90	0	1534.25	2965.75	805	4500
$298,000	$22,800	320800	1370.2	330.6	$4,650	$456	$70	6876.8	15923.2		22800

Working note:

Calculation of OASDI amount $403.0

I assume that this payroll is for the year 2016. The OASDI tax rate for wages paid in 2016 is set at 6.2%, and OASDI taxable wages have a limit of $1,185,000 for 2016, which is exceeded as seen in ending cumulative earnings (119,200).

Therefore, the amount is calculated as:

$OASDI = (OASDI limit - Begining cumulative earning) \times OASDI rate = (118, 500 - 112, 000) \times 6.2 % = 6, 500 \times 6.2 % = 403$

(2) Preparing journal entry

Date	Particulars	Debit ($)	Credit ($)
	Salaries and wages expense	22,800
	FICA-OASDI taxes payable		1,370
	FICA-Medicare taxes payable		331
	Employee Income taxes payable		4,650
	Employee Health Insurance payable		456
	United way payable		70
	Salaries and wages payable		15,923

(3) Preparing journal entry

Date	Particulars	Debit ($)	Credit ($)
	Payroll tax expense	1,970
	FICA-OASDI taxes payable		1,370
	FICA-Medicare taxes payable		331
	Federal Unemployment taxes payable		27
	State Unemployment taxes payable		243

Working notes:

Calculate payroll of the current period earnings:

Earnings			Employer Payroll Taxes
Beginning Cumulative Earnings	Current Period Earnings	Ending Cumulative earnings	OASDI	Medicare	FUTA (0.6%)	SUTA (5.4%)	Total Taxes
$77,000	$4,500	$81,500	$279	$65	$0	$0	$344
$112,000	$7200	$119,200	$403	$104	$0	$0	$507
$48,000	$3,300	$51,300	$205	$48	$0	$0	$252
$61,000	$3,300	$64,300	$205	$48	$0	$0	$252
$0	$4,500	$4,500	$279	$65	$27	$243	$614
$298,000	$22,800	$320,800	$1,370	$331	$27	$243	$1,971

(4) Preparing journal entry

Date	Particulars	Debit ($)	Credit ($)
	Salaries and wages payable	15,923.2
	Cash		15923.2

Unlock Step-by-Step Solutions & Ace Your Exams!

Full Textbook Solutions
Get detailed explanations and key concepts
Unlimited Al creation
Al flashcards, explanations, exams and more...
Ads-free access
To over 500 millions flashcards
Money-back guarantee
We refund you if you fail your exam.

Start your free trial

Over 30 million students worldwide already upgrade their learning with Vaia!

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Short Answer

Step by step solution

Meaning of Payroll

(1) Completing payroll register

(2) Preparing journal entry

(3) Preparing journal entry

(4) Preparing journal entry

One App. One Place for Learning.

Most popular questions from this chapter

Recommended explanations on Business Studies Textbooks

Operational Management

Business Case Studies

Business Operations

Intermediate Accounting

Strategic Direction

Introduction to Business

Study anywhere. Anytime. Across all devices.

Earnings			Withholdings
Beginning Cumulative Earnings	Current Period Earnings	Ending Cumulative Earnings	OASDI	Medicare	Income tax	Health Insurance	United way	Total Withholding	Net pay	Check No.	Salaries and Wages Expense
\( 77,000	\) 4,500				\( 900	\) 90	\(15			801
112,000	7,200				1,200	144	35			802
48,000	3,300				600	66	0			803
61,000	3,300				850	66	20			804
0	4,500				1,100	90	0			805
\)298,000	\(22,800				\)4,650	\(456	\)70