Question

2.Lee Financial Services pays employees monthly. Payroll information is listed below for January 2021, the first month of Lee’s fiscal year. Assume that none of the employees exceeded any relevant base of pay, such that all benefit percentages apply to the entire $500,000 payroll.

Salaries $500,000

Federal income taxes to be withheld $100,000

Federal unemployment tax rate 0.60%

State unemployment tax rate (after SUTA deduction) 5.40%

Social Security tax rate 6.2%

Medicare tax rate 1.45%

Required:

Prepare the appropriate journal entries to record salaries expense and payroll tax expense for the January 2021pay period.

Answer 1

Journal entries
S.no.	Accounts title and explanations		Debit $	Credit $
a.	Salaries and wages expenses account	5,00,000
	Federal Income tax payable			1,00,000
	FICA Social security tax payable		31000	(500000*6.20%)
	FICA Medicare tax payable			7250	(500,000*1.45%)
	Salaries and wages payable			3,61,750
	(for salaries and wages made due)
b.	Payroll tax expenses			68,250
	FICA Social security tax payable		31000	(500000*6.20%)
	FICA Medicare tax payable			7250	(500,000*1.45%)
	Federal Unemployment tax payable		3000	(500000*0.60%)
	State unemployment tax payable		27000	(500,000*5.40%)
	(for payroll tax expense recognized)