Question

The payroll register for Gamble Company for the week ended April 29 indicated the following:

Salaries	$1,440,000
Social security tax withheld	86,400
Medicare tax withheld	21,600
Federal income tax withheld	288,000

In addition, state and federal unemployment taxes were calculated at the rate of 5.4% and 0.6%, respectively, on $244,000 of salaries.

	Required:
A.	Journalize the entry to record the payroll for the week of April 29.*
B.	Journalize the entry to record the payroll tax expense incurred for the week of April 29.* * Refer to the Chart of Accounts for exact wording of account titles.

CHART OF ACCOUNTS

Gamble Company

General Ledger

ASSETS 110 Cash 111 Accounts Receivable 112 Interest Receivable 113 Notes Receivable 115 Merchandise Inventory 116 Supplies 118 Prepaid Insurance 120 Land 123 Building 124 Accumulated Depreciation-Building 125 Office Equipment 126 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 213 Interest Payable 214 Notes Payable 215 Salaries Payable 216 Social Security Tax Payable 217 Medicare Tax Payable 218 Employees Federal Income Tax Payable 219 Employees State Income Tax Payable 221 Retirement Savings Deductions Payable 224 Federal Unemployment Tax Payable 225 State Unemployment Tax Payable 226 Vacation Pay Payable 227 Unfunded Pension Liability 228 Product Warranty Payable

2.

Calculate Payroll

Breakin Away Company has three employees-a consultant, a computer programmer, and an administrator. The following payroll information is available for each employee:

	Consultant		Computer Programmer		Administrator
Regular earnings rate	$2,910 per week		$30 per hour		$44 per hour
Overtime earnings rate	Not applicable		1.5 times hourly rate		2 times hourly rate
Number of withholding allowances	3		2		1

For the current pay period, the computer programmer worked 60 hours and the administrator worked 50 hours. The federal income tax withheld for all three employees, who are single, can be determined by adding $356.90 to 28% of the difference between the employee's amount subject to withholding and $1,796.00. Assume further that the social security tax rate was 6%, the Medicare tax rate was 1.5%, and one withholding allowance is $70.

Determine the gross pay and the net pay for each of the three employees for the current pay period. Assume the normal working hours in a week are 40 hours. If required, round your answers to two decimal places.

	Consultant	Computer Programmer	Administrator
Gross pay	$	$	$
Net pay	$	$	$

Answer 1

1) A Journal entry to record payroll

		Debit	Credit
Salaries Expenses	Dr.	1440000
To Social Security Tax Payable			86400
To Medicare Tax Payable			21600
To Employees Federal Income Tax Payable			288000
To Salaries Payable			1044000

B Journal entry for payroll tax expenses

		Debit	Credit
Payroll Tax expenses	Dr.	122640
To Social Security Tax Payable			86400
To Medicare Tax Payable			21600
To State Unemployment Tax Payable			13176
To Federal Unemployment Tax Payable			1464

State Unemployment Tax Payable = $244000*5.4% = $13176

To Federal Unemployment Tax Payable = $244000*0.6% = $1464

2) Calculation of Gross Pay

	Consultant	Computer Programmer	Administrator
Hours worked		60	50

Overtime worked 20 10

Overtime pay rate 45 88

Overtime pay $900 $880

Normal Pay (40hrs*30)=$1200 (40hrs*44) =$1760

Gross Pay $2910 $2100 $2640

CALCULATION OF NET PAY & FEDERAL TAX WITHOLDING