Question

Lee Werner is general manager of United Salons. During 2018​, Werner worked for the company all year at a $14,200 monthly salary. He also earned a​ year-end bonus equal to 10​% of his annual salary.

Werner​'s federal income tax withheld during 2018 was $1,420 per​ month, plus $1,704

on his bonus check. State income tax withheld came to $160 per​ month, plus $50 on the bonus. FICA tax was withheld on the annual earnings.

Werner authorized the following payroll​ deductions: Charity Fund contribution of 1​% of total earnings and life insurance of $20 per month.

United incurred payroll tax expense on Werner for FICA tax. The company also paid state unemployment tax and federal unemployment tax.

For all payroll​ calculations, use the following tax rates and round amounts to the nearest​ cent:

Employee:	​OASDI: 6.2​% on first $118,500 earned; Medicare: 1.45​% up to $200,000​, 2.35​% on earnings above $200,000.
​Employer:	​OASDI: 6.2​% on first $118,500 earned; Medicare: 1.45​% on all earnings; FUTA: 0.6​% on first $7,000 earned; SUTA: 5.4​% on first $7,000 earned

1.	Compute Werner​'s gross​ pay, payroll​ deductions, and net pay for the full year 2018. Round all amounts to the nearest dollar.
2.	Compute United​'s total 2018 payroll tax expense for Werner.
3.	Make the journal entry to record United​'s expense for Werner​'s total earnings for the​ year, his payroll​ deductions, and net pay. Debit Salaries Expense and Bonus Expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required.
4.	Make the journal entry to record the accrual of United​'s payroll tax expense for Werner​'s total earnings.
5.	Make the journal entry for the payment of the payroll withholdings and taxes.

Round all amounts to the nearest dollar.

Answer 1

Answer-Payroll for the year ended December 31,2018:-

Particulars	Amount	Amount
Gross Pay:-
Salary (12*$14,200)	$170,400
Bonus ($170,400*10%)	$17,040
Total Gross Pay		$187,440

Deductions:-
Federal Income Tax (12*$1,420)+$1,704	$18,744
State Income Tax (12*$160)+$50	$1,970
FICA-OASDI ($118,500*6.2%)	$7,347
FICA-Medicare ($187,440 *1.45%)	$2,718
Charity Fund ($187,440*1%)	$1,874
Life Insurance (12*$20)	$240
Less: Total Deductions		$32,893
Net (take-home) pay		$154,547

2-Employer Payroll Expenses for the Year Ended December 31,2018:-

	Calculation	Amount
Total Gross Pay		$187,440
Employer Payroll Taxes:-
FICA-OASDI ($118,500*6.2%)	$7,347
FICA-Medicare ($187,440*1.45%)	$2,718
FUTA ($7,000*0.6%)	$42
SUTA ($7,000*5.4%)	$378
Total Employer Payroll Tax		$10,485

3-Journal Entry:-

Date	Account Title and Explanation	Debit ($)	Credit ($)
Dec.31	Salaries Expenses	170,400
	Bonus Expenses	17,040
	Employees Federal Income Taxes Payable		18,744
	Employees State Income Taxes Payable		1,970
	FICA-OASDI Taxes Payable		7,347
	FICA-Medicare Taxes Payable		2,718
	Charity Fund Payable		1,874
	Life Insurance Payable		240
	Cash		154,547
	(To record salaries expenses and payroll withholdings is recorded)

4-Journal Entry:-

Date	Account Title and Explanation	Debit ($)	Credit ($)
Dec.31	Payroll Tax Expense	10,485
	FICA-OASDI Taxes Payable		7,347
	FICA-Medicare Taxes Payable		2,718
	Federal Unemployment Taxes Payable		42
	State Unemployment Taxes Payable		378
	(To record employer's payroll tax expenses)

5-Journal Entry:-

Date	Account Title and Explanation	Debit ($)	Credit ($)
	Employees Federal Income Taxes Payable	18,744
	Employees State Income Taxes Payable	1,970
	FICA-OASDI Taxes Payable ($7,347+$7,347)	14,694
	FICA-Medicare Taxes Payable ($2,718+$2,718)	5,436
	Charity Fund Payable	1,874
	Life Insurance Payable	240
	Federal Unemployment Taxes Payable	42
	State Unemployment Taxes Payable	378
	Cash		43,378
	(To record the payment of the payroll withholdings and taxes)

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