Question

Brief Exercise 8-49 Payroll Taxes Sid's Grocery Store has 100 employees who earn a wage of $18.75 per hour. Each of Sid's employees has worked a total of 160 hours over the month of July. At the time of recording July's monthly payroll, the following amounts have been withheld: Federal income tax State income tax Social Security $30,000 8,000 18,600 4,350 1% of gross pay 1% of gross pay Medicare Charitable contributions Union dues Also, the unemployment tax rate is 2% and applies to all but $30,000 of the gross payroll. Required: 1. What is the amount of net pay recorded by Sid's? 233,050 Feedback Check My Work 1. Payroll taxes are withheld from employee wages and salaries. 2. Make the journal entries to record the payroll. If an amount box does not require an entry, leave it blank. Wages Expense 300,000 Federal Income Taxes Withholding Payable 30,000 8,000 18,600 4,350 State Income Taxes Withholding Payable Social Security Taxes Payable (Employee) Medicare Taxes Payable (Employee) Charitable Contributions Payable Union Dues Payable Federal Unemployment Taxes Payable (Record wages and liabilities) 3,000 3,000 Federal Unemployment Taxes Expense Social Security Taxes Payable (Employer) Medicare Taxes Payable (Employer) Federal Unemployment Taxes Payable 4,350 5,400 (Record employer payroll taxes)

Answer 1

1. What is the amount of net pay? [Refer working note]

$233,050

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Account Titles and Explanation	Debit	Credit
Wages Expense                                                       [Gross Pay = 100 x 160 x $18.75]	$300,000
Federal Income taxes Withholding payable		$30,000
State Income taxes Withholding payable		$8,000
Social Security taxes payable (Employee)		$18,600
Medicare taxes payable (Employee)		$4,350
Charitable Contribution Payable		$3,000
Union Dues Payable		$3,000
Salaries and Wages Payable / Wages Payable      [Net pay --> Refer working note]		$233,050
(Record wages and liabilities)
Payroll tax Expense                                      [$28,350 + $18,600 + $4,350 + $5,400]	$28,350
Social Security taxes payable (Employer)		$18,600
Medicare taxes payable (Employer)		$4,350
Federal Unemployment Taxes Payable   [($300,000 - $30,000) x 2%)]		$5,400
(Record employer payroll taxes)

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Working note - Computation of net pay
Gross Pay [100 employees x 160 hours x $18.75 per hour]		$300,000
Less: Withheld amounts:
Federal income tax	$30,000
State income tax	$8,000
Social Security tax	$18,600
Medicare tax	$4,350
Charitable contributions   [Gross pay x 1% = $300,000 x 1%]	$3,000
Union dues                       [Gross pay x 1% = $300,000 x 1%]	$3,000
Total		$66,950
Net Pay    [$300,000 - $66,950]		$233,050