Exercise 13-6 The payroll of Culver Company for September 2016 is as follows. To
ID: 2531075 • Letter: E
Question
Exercise 13-6
The payroll of Culver Company for September 2016 is as follows.
Total payroll was $434,000, of which $104,000 is exempt from Social Security tax because it represented amounts paid in excess of $118,500 to certain employees. The amount paid to employees in excess of $7,000 was $363,000. Income taxes in the amount of $72,400 were withheld, as was $9,500 in union dues. The state unemployment tax is 3.5%, but Culver Company is allowed a credit of 2.3% by the state for its unemployment experience. Also, assume that the current FICA tax is 7.65% on an employee’s wages to $118,500 and 1.45% in excess of $118,500. No employee for Culver makes more than $125,000. The federal unemployment tax rate is 0.8% after state credit.
Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are recorded separately. (Round answers to 0 decimal places, e.g. 5,275. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts .Credit account titles are automatically indented when amount is entered. Do not indent manually.)
Account Titles and Explanation
Debit
Credit
(To record wages and salaries paid)
(To record employer payroll taxes)
Account Titles and Explanation
Debit
Credit
(To record wages and salaries paid)
(To record employer payroll taxes)
Explanation / Answer
SOLUTION
S.No. Account titles and Explanation Debit ($) Credit ($) 1. Salaries and Wages Expense 434,000 Withholding Taxes Payable 72,400 FICA Taxes Payable {[($434,000 - $104,000)*7,65%] + ($104,000 *1.45%)} 26,753 Union Dues Payable 9,500 Cash 325,347 (To record wages and salaries paid) 2. Payroll Tax Expense 28,201 FICA Taxes Payable 26,753 FUTA Taxes Payable ($72,400 * 0.8%) 579 SUTA Taxes Payable ($72,400 * 1.2%) 869 (To record employer payroll taxes)Related Questions
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