The payroll register for Lazur Corporation contained the following totals at the end of July 2011: wages, $69,623; federal income taxes withheld, $17,791; state income taxes withheld, $2,923; social security tax withheld, $4,313; Medicare tax withheld, $1,009; medical insurance deductions, $2,400; and wages subject to unemployment taxes, $42,930.
REQUIRED
1. Prepare journal entries to record the
(a) Monthly payroll
(b) Employer payroll expenses, assuming social security and Medicare taxes equal to the amount for employees, a federal unemployment insurance tax of 0.8 percent, a state unemployment tax of 5.4 percent, and medical insurance premiums for which the employer pays 80 percent of the cost.
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2. If Lazur is planning to hire a new employee for a salary of $1,000 per month, approximately how should the company budget per month for the total cost of this new employee?
SOLUTION
1. Journal entries prepared
a.
2011
July
31
Wages Expense
Wages Expense
Wages Expense
Wages Expense
Wages Expense
69,623.00
Employees' Federal Income Taxes Payable
Employees' Federal Income Taxes Payable
Employees' Federal Income Taxes Payable
Employees' Federal Income Taxes Payable
Employees' Federal Income Taxes Payable
Employees' Federal Income Taxes Payable
17,791.00
Employees' State Income Taxes Payable
Employees' State Income Taxes Payable
Employees' State Income Taxes Payable
Employees' State Income Taxes Payable
Employees' State Income Taxes Payable
Employees' State Income Taxes Payable
2,923.00
Social Security Tax Payable
Social Security Tax Payable
Social Security Tax Payable
Social Security Tax Payable
Social Security Tax Payable
Social Security Tax Payable
4,313.00
Medicare Tax Payable
Medicare Tax Payable
Medicare Tax Payable
Medicare Tax Payable
Medicare Tax Payable
1,009.00
Medical Insurance Premiums Payable
Medical Insurance Premiums Payable
Medical Insurance Premiums Payable
Medical Insurance Premiums Payable
Medical Insurance Premiums Payable
Medical Insurance Premiums Payable
2,400.00
Wages Payable
Wages Payable
Wages Payable
Wages Payable
41,187.00
To record the payroll
To record the payroll
To record the payroll
To record the payroll
To record the payroll
b.
July
31
Payroll Taxes and Benefits Expense
Payroll Taxes and Benefits Expense
Payroll Taxes and Benefits Expense
Payroll Taxes and Benefits Expense
Payroll Taxes and Benefits Expense
Payroll Taxes and Benefits Expense
Payroll Taxes and Benefits Expense
17,583.66
Social Security Tax Payable
Social Security Tax Payable
Social Security Tax Payable
Social Security Tax Payable
Social Security Tax Payable
Social Security Tax Payable
4,313.00
Medicare Tax Payable
Medicare Tax Payable
Medicare Tax Payable
Medicare Tax Payable
Medicare Tax Payable
1,009.00
Medical Insurance Premiums Payable
Medical Insurance Premiums Payable
Medical Insurance Premiums Payable
Medical Insurance Premiums Payable
Medical Insurance Premiums Payable
Medical Insurance Premiums Payable
9,600.00
Federal Unemployment Tax Payable
Federal Unemployment Tax Payable
Federal Unemployment Tax Payable
Federal Unemployment Tax Payable
Federal Unemployment Tax Payable
Federal Unemployment Tax Payable
343.44
State Unemployment Tax Payable
State Unemployment Tax Payable
State Unemployment Tax Payable
State Unemployment Tax Payable
State Unemployment Tax Payable
State Unemployment Tax Payable
2,318.22
To record payroll expenses
To record payroll expenses
To record payroll expenses
To record payroll expenses
To record payroll expenses
Computations:
Computations:
Computations:
Computations:
Computations:
$2,400
$2,400
$2,400
÷
0.20
=
$12,000
$12,000
$12,000
$12,000
–
$2,400
=
$9,600
$42,930
$42,930
$42,930
×
0.008
=
$343.44
$42,930
$42,930
$42,930
×
0.054
=
$2,318.22
2. Cost of new employee estimated
Lazur Corporation incurred $17,583.66 in payroll taxes and benefits on payroll expenses of $69,623, or 25.3 percent. Thus, for a new $1,000-per-month position, $1,253 [$1,000 + ($1,000 × 0.253)] should be budgeted.