Harding Corp. has two employees, Gilooly and Eckhardt. During the first week of
ID: 2588338 • Letter: H
Question
Harding Corp. has two employees, Gilooly and Eckhardt. During the first week of January (the first pay period of the new year) Gilooly worked 50 hours while Eckhardt worked 40 hours. Gilooly's hourly wage rate is $50 while Eckhardt's is $10. Overtime begins past 40 hours. The following payroll data is available to you: 1) Gilooly's Federal withholding taxes or the period is $440 while Eckhardt's is $30. 2) Union dues are $20 each. 3) Assume that the FICA rate is 6% and the medicare is 1.5% of gross wages while State Unemployment Insurance and Federal Unemployment are 5% and 1% respectively. Assume the Unemployment Insurance is based on the first $10,000 of wages. 4) REQUIRED Prepare all the necessary journal entries relating to the payroll for Harding Security Corp. for the first week of January. Please show all work neatly. (you may round off to the nearest dollar.)Explanation / Answer
Hours
Regular
Overtime
Gross Pay
FICA (6% + 1.5%)
Federal Withholding Tax
United Fund
Net Pay
50
(40 x 50) = 2,000
(10 x 50) = 500
2,500
2,500 x 7.5% = 187.5
440
20
1852.5
40
(40 x 10) = 400
0
400
400 x 7.5% = 30
30
20
320
TOTAL
2,400
500
2,900
217.5
470
40
2172.5
Journal Entries
Date
Account
Debit
Credit
Salaries & Wages Expense
TO FICA Tax Payable
TO Federal income tax payable
TO United Contributions payable
TO Salary & Wages Payable
2,900
217.5
470
40
2172.5
Payroll Tax Expense
TO FICA Tax Payable (Employer)
TO State Unemployment Tax Payable
TO Federal Unemployment Tax Payable
391.5
217.5
145
29
NOTE: FICA Tax is assumed to be including only Social Security tax and exclusive of Medicare Tax. Therefore, we have added 1.5% of Medicare tax to the FICA tax for total amount.
State Unemployment & federal unemployment tax are payable by the employer only.
Calculation of State Unemployment Tax
State Unemployment = 2,900 x 5% = $145
Federal Unemployment = 2,900 x 1% = $29
The amount of State unemployment insurance paid can be taken as credit from the federal unemployment tax. However, in the given case, the amount of state unemployment tax rate is more than the federal tax rate and therefore, the federal unemployment rate of 1% is net of state insurance. Gross federal rate is (5%+1%) = 6%
Hours
Regular
Overtime
Gross Pay
FICA (6% + 1.5%)
Federal Withholding Tax
United Fund
Net Pay
50
(40 x 50) = 2,000
(10 x 50) = 500
2,500
2,500 x 7.5% = 187.5
440
20
1852.5
40
(40 x 10) = 400
0
400
400 x 7.5% = 30
30
20
320
TOTAL
2,400
500
2,900
217.5
470
40
2172.5
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