You are viewing the free preview. Purchase this assignment once to reveal the complete resource.
$9.99 USD
Secure checkout is completed by Stripe.
• FICA tax rates for 2009 were 7.65% on the first $106,800 of each employee’s annual earnings and 1.45% on any earnings in excess of $106,800. However, no employees had accumulated earnings for the year in excess of the $106,800 limit. The FICA tax rates are levied against both employers and employees.
• The federal and state unemployment compensation tax rates are 0.8% and 5.4%, respectively. These rates are levied against the employer for the first $7,000 of each employee’s annual earnings. Only $7,500 of the gross pay amount for the December 27, 2009, pay period was owed to employees who were still under the annual limit.
Required:
Assuming that Cayman Coating Co.’s payroll for the last week of the year is to be paid on January 3, 2010, use the horizontal model (or write the journal entry) to record the effects of the December 27, 2009, entries for
a. Accrued payroll.
b. Accrued payroll taxes.
SOLUTION
a.
FICA Tax Withholdings (employees portion) = Gross Pay * 7.65% = $53,000 * 7.65% = $4,054.50 Employee Contributions to Pension Plans = (Total Deductions - all other deductions) = $14,088 - $4.054.50 - $7,680 - $960 = $1,393.50 Net Pay = Gross Pay - Total Deductions = $53,000 - $14,088 = $38,912
Balance Sheet Income Statement . Assets = Liabilities + Owners’ Equity Net income = Revenues - Expenses
Wages Payable Wages +38,912 Expense Withholding Liabilities (accounts as described below) -53,000 +4,054.50 +7,680 +960 +1,393.50
Dr. Wages Expense ……….. 53,000.00 Cr. Wages Payable (or Accrued Payroll) 38,912.00 Cr. FICA Taxes Withheld (employees’ share) ……… 4,054.50 Cr. Income Taxes Withheld 7,680.00 Cr. Group Hospitalization Insurance 960.00 Cr. Employee Contributions to Pension Plan 1,393.50 To record accrued payroll.
b.
The employer’s payroll taxes consist of the following: FICA tax withholdings ($53,000 * 7.65%) $4,054.50 Federal unemployment compensation taxes ($7,500 * 0.8%) 60.00 State unemployment compensation taxes ($7,500 * 5.4%) 405.00 Total employer payroll taxes $4,519.50
b.
Balance Sheet Income Statement . Assets = Liabilities + Owners’ Equity Net income = Revenues - Expenses
Payroll Taxes Payroll Tax Payable (or other descriptions) Expense +4,519.50 -4,519.50 Dr. Payroll Tax Expense 4,519.50 Cr. Payroll Taxes Payable (or Accrued Payroll Taxes)………. 4,519.50 To record accrued payroll taxes. Alternative entry: The credits in the above entry are often broken down in the chart of accounts based on the nature of the employer’s payroll tax obligations, such as: Dr. Payroll Tax Expense 4,519.50 Cr. FICA Taxes Withheld (employer’s share) ……… 4,054.50 Cr. Federal Unemployment Taxes Withheld 60.00 Cr. State Unemployment Taxes Withheld 405.00 To record accrued payroll taxes.