Question

Exercise 13-06

The payroll of YellowCard Company for September 2019 is as follows. 

Total payroll was $480,000, of which $110,000 is exempt from Social Security tax because it represented amounts paid in excess of $128,400 to certain employees. The amount paid to employees in excess of $7,000 was $400,000. Income taxes in the amount of $80,000 were withheld, as was $9,000 in union dues. The state unemployment tax is 3.5%, but YellowCard Company is allowed a  credit of 2.3% by the state for its unemployment experience. Also, assume that the current FICA tax is 7.65% on an employee's wages to $128,400 and 1.45% in excess of $128,400. No employee for YellowCard makes more than $135,000. The federal unemployment tax rate is 0.8% after state credit. 

Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are recorded separately. 

Answer 1