Question

Lee Financial Services pays employees monthly. Payroll information is listed below for January 2018, the first month of Lee's fiscal year. Assume that none of the employees exceeded any relevant wage base, Salaries Federal income taxes to be withheld Federal unemployment tax rate State unemployment tax rate (after FUTA deduction) Social security tax rate Medicare tax rate $500,000 100,000 0.60% 5.40% 6.209 1.45% Required: Calculate the income and payroll taxes for the January 2018 pay period. Prepare the appropriate journal entries to record salaries and wages expense (not paid) and payroll tax expense for the January 2018 pay period. Complete this question by entering your answers in the tabs below.

Answer 1

Please find below table useful to compute desired results: -

Particulars Given 2 Salaries 3 Federal Income taxes to be withheld 4 Federal unemployment tax rate 5 State unemployment tax rate 6 Social Security tax rate 7 Medicare tax rate 8 Tax 9 Federal Income taxes to be withheld 500000 100000 |=0.6/100 |=5.4/100 |=6.2/100 =1.45/100 Amount withheld from employee's gross pay =C3 =C2*C6 =C2*C7 Amount Paid by Employer |=C2*C6 |=C2*C7 |=C2*C4 |=C2*C5 |=SUM(D10:D13) 10 Social Security Tax 11 Medicare tax 12 Federal unemployment tax 13 State unemployment tax =SUM(C9:C11) Journal of Employee payroll Debit =C2 14 Total 15 Accounts Titles and Explanations Credit 16 Date 17 Jan. 2018 Salaries Wages expense Withholding income tax payable Social Security tax payable Medicare tax payable Salaries and Wages payable |=C9 =C10 18 19 =C11 |=C2-C14 20 21 (to record salaries and wages liability to be paid after the necessary deductions) 22 Journal of Employer payroll Debit 23 Accounts Titles and Explanations 24 Date Credit 25 Jan. 2018 Payroll tax expense Social Security tax payable Medicare tax payable Federal unemployment tax payable State unemployment tax payable =D14 =D10 26 =D11 27 =D12 28 |=D13 29 (to record employer's tax liabilities) 30

End results would be as follows: -

Particulars Given Salaries 500,000 2 Federal Income taxes to be withheld 100,000 0.60% 5.40% 6.20% 1.45% Amount withheld from employee's gross pay 3 Federal unemployment tax rate State unemployment tax rate Social Security tax rate 4 5 Medicare tax rate Amount Paid by Employer Тах Federal Income taxes to be withheld 100,000 10 Social Security Tax 31,000 31,000 11 Medicare tax 7,250 7,250 12 Federal unemployment tax 13 State unemployment tax 3,000 27,000 138,250 68,250 14 Total Journal of Employee payroll 15 Accounts Titles and Explanations Salaries Wages expense Withholding income tax payable Social Security tax payable Medicare tax payable Salaries and Wages payable Date Debit Credit 16 Jan. 2018 500,000 17 100,000 31,000 18 19 7,250 20 361,750 21 (to record salaries and wages liability to be paid after the necessary deductions) 22 Journal of Employer payroll 23 Accounts Titles and Explanations Payroll tax expense Social Security tax payable Medicare tax payable Federal unemployment tax payable State unemployment tax payable Credit Date Debit 24 Jan, 2018 68,250 25 31,000 7,250 26 27 3,000 28 27,000 29 (to record employer's tax liabilities) 30