Question

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The following summary data for the payroll period ended December 27, 2015, are available for Cayman Coating Co.:

   

Gross pay	$	172,000
FICA tax withholdings		?
Income tax withholdings		20,640
Group hospitalization insurance		2,540
Employee contributions to pension plan		?
Total deductions		41,650
Net pay		?

   

Additional information:

• For employees, FICA tax rates for 2015 were 7.65% on the first $118,500 of each employee’s annual earnings. However, no employees had accumulated earnings for the year in excess of the $118,500 limit.
• For employers, FICA tax rates for 2015 were also 7.65% on the first $118,500 of each employee’s annual earnings.
• The federal and state unemployment compensation tax rates are 0.6% and 5.4%, respectively. These rates are levied against the employer for the first $7,000 of each employee’s annual earnings. Only $18,000 of the gross pay amount for the December 27, 2015, pay period was owed to employees who were still under the annual limit.

Answer 1

Gross pay	$ 1,72,000.00
FICA tax withholdings (172000 x 7.65%)	$    13,158.00
Income tax withholdings	$    20,640.00
Group hospitalization insurance	$      2,540.00
Employee contributions to pension plan	$      5,312.00
Total deductions	$    41,650.00
Net pay	$ 1,30,350.00
FICA tax withholdings (employee's portion) = Gross Pay × 7.65%= $172,000 × 7.65% =	$    13,158.00
Employee contributions to pension plans = (Total Deductions – all other deductions)= $41,650 – $13,158 – $20,640 – $2,540=	$      5,312.00
Journal entry
Wages Expenses	$ 1,72,000.00
Accrued Payroll		$ 1,30,350.00
FICA tax withholdings		$    13,158.00
Income tax withholdings		$    20,640.00
Group hospitalization insurance		$      2,540.00
Employee contributions to pension plan		$      5,312.00
Employer's Payroll Tax
Payroll Tax Expenses	$    13,578.00
FICA tax withholdings (172000 x 7.65%)		$    13,158.00
Federal unemployment compensation tax = 7000 x .6%		$           42.00
State unemployment compensation tax = 7000 x 5.4%		$         378.00