Lee Werner is general manager of Stoncybrook Salons. During 2016, Werner worked
ID: 2469432 • Letter: L
Question
Lee Werner is general manager of Stoncybrook Salons. During 2016, Werner worked for the company all year at a S14,000 monthly salary. He also earned a year-end bonus equal to 15% of his annual salary. Werner's federal income tax withheld during 2016 was $980 per month, plus $1,700 on his bonus check. State income tax withheld came to $60 per month, plus $40 on on the benus. FICA tax was withheld on the annual earnings. Werner authorized the following payroll deductions: Charity Fund contribution of 2% of total earnings and life insurance of $35 per month. Stoneybrook incurred payroll tax expense on Werner for FICA tax. The company also paid state unemployment tax and federal unemployment tax. Requirements 1. Compute Werner's gross pay. payroll deductions, and net pay for the full year 2016. Round all amounts to the nearest dollar. Compute Stoncybrook's total 2016 payroll tax expense for Werner. Make the journal entry to record Stoneybrook's expense for Werners total earnings for the year, his payroll deductions, and net pay. Debit Salaries Expense and Bonus Expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required. Make the journal entry to record the accrual of Stoneybrooks payroll tax expense for Werner's total earnings.Explanation / Answer
Requirement 1
Calculation of gross pay of werner:
Salary =$168,000
Bonus = $25,200
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Total Gross Pay =$193,200
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Pay roll deductions of Werner:
Federa tax ($980×12) =$11,760
Tax on Bonus = 1,700
State Income Tax = 720
State Tax on Bonus = 40
Charity fund deductions@2% = 3,864
Life insurance (35×12) = 420
Social security tax @6.2%on
A maximum of 118,500 = 7,347
Medicare tax @ 1.45% on
A maximum of 118,500 = 1,718
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Total deductions =$27,569
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Requirement 2
Stoney Brook’s total payroll expense for werner:
Employer’s Social security taxs (118,500× 6.2%) =7,347
Employer’s medicare tax (118,500×1.45%) =1,718
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Total FICA =9,065
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We have to add central and State unemployment tax to the above said employer’s congtribution to arrive at total expense of employer in relation to werner’s.
Net Pay= $193200– 27,569 = $165,631
Requirement 3
Journal Entry:
Salary account $168,000
Bonus account $25,200
Federal Tax account 11,760
Tax on bonus 1,700
State Income Tax 720
State tax on bonus 40
Charty fund 3,864
Life insurance 420
Cash 165,631
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