P1. The following information pertains to the payrolls of A Company for the mont

Question

P1. The following information pertains to the payrolls of A Company for the month of July 2017: ployee Wage earned State/local Wage earned in July 2017 Em Federal Income By 6/30/2017 Tax ncome laxes $ l 10,000 $900 250 50 $18,000 Jane Tom Bill 60,000 6,000 10,000 1,100 $2,500 1,200 300 Actual state unemployment tax rate is 4%, while the federal unemployment tax rate is 0.08%. The taxable income limit for social security tax is $118,000/person, year, while the taxable income limit for SUTA and FUTA is $7,000/ person, year. Instructions: Prepare the necessary journal entries for July payrolls of A Company if salaries and wages are paid in cash after withholding all payroll taxes and dues.

Explanation / Answer

Employee Wages earned in July W` Federal Income tax F State Income Tax S Social Security taxes Y Medicare taxes M=W*1.45% Net pay W-F-S-Y-M Jane $18,000 $2,500 $900 496 $261 $13,843 (8000*6.2%) Tom $10,000 1200 250 620 $145 $7,785 10000*6.2% Bill 1100 300 50 68.2 $16 $666 1100*6.2% Total $29,100 $4,000 $1,200 $1,184.20 $421.95 $22,293.85 Accounts Title Dr Cr 31-Jul Salaries Expenses $29,100 Federal Income tax payable $4,000.00 State Income Tax payable $1,200.00 Social security taxes payable $1,184.20 Medicare Taxes payable $421.95 Cash $22,293.85 (being payrolll recorded and paid) 31 Jult Payroll taxes expenses $1,647 Social security taxes payable $1,184 Medicare Taxes payable $422 Federal Unemployment taxes payable (1000*.08%) 0.8 State Unemployment taxes payable (1000*4%) 40 (being payroll taxes expenses recorded)

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