Below is a payroll sheet for Otis Import Company for the month of September 2014

Question

Below is a payroll sheet for Otis Import Company for the month of September 2014. 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 $113,700. In addition, 1.45% is charged both employer and employee for an employee’s wages in excess of $113,700 per employee.

(a)

Unemployment Tax

Name

Earnings
to Aug. 31

September
Earnings

Income Tax
Withholding

FICA

State

Federal

Account Titles and Explanation

Debit

Credit

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Below is a payroll sheet for Otis Import Company for the month of September 2014. 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 $113,700. In addition, 1.45% is charged both employer and employee for an employee’s wages in excess of $113,700 per employee.

Explanation / Answer

Name Earnings September Income Tax FICA State Federal to Aug. 31 Earnings Withholding B.D. Williams $6,520 $800 $80.0 0 $73.20 $7.04 D. Raye 6,460 700 $70.0 0 $71.60 $6.16 K. Baker 7,520 1,200 $120.0 0 $87.20 $10.56 F. Lopez 13,800 1,800 $180.0 0 $156.00 $15.84 A. Daniels 108,000 12,100 $1,210.0 0 $1,201.00 $106.48 B. Kingston 112,590 17,800 $1,780.0 9974.835 $1,303.90 $156.64 Total $ $ $3,440.0 $9,974.8 $2,892.90 $302.72 Dr Cr. Salary A/c $34,400.0 To Income tax payable $3,440.0 To Fica tax payable 9974.835 To unemplyment tax payable $3,195.62 To Cash $17,789.5

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