Question

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Chapter 11: Extra Credit Due: Friday February 28, 2020 1. Parrish Sales has two employees, Ana and Michael. Ana's and Michael's gross annual salary for 2020 was 118,000 and 204,000 respectively. The company pays 80% of their employees' health premiums, while each employee is responsible for the other 20%. Ana paid 10,000 in health premiums, while Michael paid 15,000. The OASDI (social security) limit for 2020 is 137,700, and thus subject to FICA. Both employees are subject to federal and state income taxes. Assume that Ana's federal tax rate is 30%, and Michael's rate is 35%. Both are subject to NYS tax rate of 6%; FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45% for the first 200,000 and 2.35% for any amount above 200,000. A) Prepare the journal entries to record salaries expense and payroll withholdings. (3 Points) B) Prepare the journal entry to record Parrish Sales Payroll expenses for 2020. (3 Points) You must show all calculations!!!!

Answer 1

Calculation of holdings:
					Calculations
	Ana	Michael	Total		Ana	Michael
Gross Annual Salary	118000	204000	322000
Fed. Income tax	35400	71400	106800		118000*0.3	204000*0.35
NYS (state) Income tax	7080	12240	19320		118000*0.06	204000*0.06
OASDI (social security)	7316	8537.4	15853.4		118000*0.062	137700*0.062
Medicare Tax	1711	2994	4705		118000*0.0145	200000*0.0145 + 4000*0.0235
Health Ins. Premium	10000	15000	25000
Total Withheld	61507	110171.4	171678.4

Req A & B)

Journal Entries:
Date	Acc Titles	Debit $	Credit $
31-Dec-20	Salaries expense	322000
	Fed. Income tax withheld		106800
	State Income tax withheld		19320
	social security tax withheld		15853.4
	medicare tax withheld		4705
	health Insurance Premium withheld		25000
	Cash		150321.6
	(the salary expense and withheld taxes recorded for the year)
31-Dec-20	Parrish Sales Payroll Expenses	120558.4
	social security tax payable		15853.4
	medicare tax payable		4705
	Prepaid health Insurance Premium		100000		25000*(80/20)
	(payroll expenses made payable and premium adjustment made)
Note : The question is silent about the Unemployment taxes.