Ex. 32
Diane Lane earns a salary of $9,500 per month during the year. FICA taxes are 7.65% on the first $106,800 of gross earnings. Federal unemployment insurance taxes are 6.2% of the first $7,000; however, a credit is allowed equal to the state unemployment insurance taxes of 5.4% on the $7,000. During the year, $32,300 was withheld for federal income taxes and $6,700 was withheld for state income taxes.
Instructions
(a)Prepare a journal entry summarizing the payment of Lane’s total salary during the year.
(b)Prepare a journal entry summarizing the employer payroll tax expense on Lane's salary for the year.
(c)Determine the cost of employing Lane for the year.
Ex. 33
Banner Company had the following payroll data for the year:
Gross earnings of employees$900,000
Employee earnings not subject to FICA tax100,000
Employee earnings not subject to FUTA or SUTA tax610,000
Assume the following:
FICA tax rate7.65%
State Unemployment tax rate5.4%(SUTA)
Federal Unemployment tax rate.8%(FUTA)
Instructions
Compute Banner's payroll tax expense for the year. Make a summary journal entry to record the payroll tax expense.
Solution 33(25 min.)
Compute FICA tax:$900,000
Less: Exempted wages 100,000
Wages subject to FICA tax 800,000
Applicable tax rate .0765
FICA tax expense $61,200
Compute FUTA tax:$900,000
Less: Exempted wages 610,000
Wages subject to FUTA tax290,000
Applicable tax rate .008
FUTA tax expense $2,320
Wages subject to SUTA tax$290,000
Applicable tax rate .054
SUTA tax expense $15,660
Journal entry to record payroll tax expense:
Payroll Tax Expense ......................................79,180
FICA Taxes Payable ..................................61,200
FUTA Taxes Payable ..................................2,320
SUTA Taxes Payable ..................................15,660