Question

The following is a payroll sheet for Otis Imports for the month of September 2020. The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is $7,000. Assume a 10% federal income tax rate for all employees and a 7.65% FICA tax on employee and employer on a maximum of $128,400. In addition, 1.45% is charged both employer and employee for an ­employee’s wages in excess of $128,400 per employee.
Name Earnings to Aug. 31 September Earnings Income Tax Withholding FICA Unemployment Tax State Federal
B.D. Williams $  6,800 $   800
D. Raye 6,500 700
K. Baker 7,600 1,100
F. Lopez 13,600 1,900
A. Daniels 116,900 13,000
B. Kingston 121,900 16,000
Instructions
a. Complete the payroll sheet and make the necessary entry to record the payment of the payroll.
b. Make the entry to record the payroll tax expenses of Otis Imports.
c. Make the entry to record the payment of the payroll liabilities created. Assume that the company pays all payroll liabilities at the end of each month.

Answer 1

Answer:

a) I used an excel spreadsheet since there is not enough room here.

September 30, 202x, wages expense

Dr Wages expense 33,500

    Cr Federal income tax withholdings payable 3,350

    Cr FICA taxes (withholdings) payable 2,722.25

    Cr Wages payable 27,427.75

           

b) September 30, 202x, payroll taxes expense

Dr FICA taxes expense 2,722.25

Dr FUTA tax expense 5.60

Dr SUTA tax expense 7

    Cr FICA taxes withholdings payable 2,722.25

    Cr FUTA taxes payable 5.60

    Cr SUTA taxes payable 7

c) September 30, 202x, payment of payroll liabilities

Dr Wages payable 27,427.75

Dr Federal income tax withholdings payable 3,350

Dr FICA taxes withholdings payable 5,444.50

Dr FUTA taxes payable 5.60

Dr SUTA taxes payable 7

    Cr Cash 36,234.85

Download pdf