(L.OBJ. 3, 4) Computing and journalizing payroll amounts [25—35 min]
Logan White is general manager of Moonwalk Tanning Salons. During 2010, White worked for the company all year at a $6,100 monthly salary. He also earned a year-end bonus equal to 5% of his salary.
White’s federal income tax withheld during 2010 was $810 per month, plus $932 on his bonus check. State income tax withheld came to $80 per month, plus $70 on the bonus. The FICA tax withheld was 8% of the first $90,000 in annual earnings. White authorized the following payroll deductions: United Fund contribution of 1% of total earnings and life insurance of $20 per month.
Moonwalk incurred payroll tax expense on White for FICA tax of 8% of the first $90,000 in annual earnings. The company also paid state unemployment tax of 5.4% and federal unemployment tax of 0.8% on the first $7,000 in annual earnings. In addition, Moonwalk provides White with health insurance at a cost of $110 per month. During 2010, Moonwalk paid $2,000 into White’s retirement plan.
Requirements
1. Compute White’s gross pay, payroll deductions, and net pay for the full year 2010. Round all amounts to the nearest dollar.
2. Compute Moonwalk’s total 2010 payroll expense for White.
3. Make the journal entry to record Moonwalk’s expense for White’s total earnings for the year, his payroll deductions, and net pay. Debit Salary expense and Bonus expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required.
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