Question

Lee Financial Services pays employees monthly. Payroll information is listed below for January 2018, the first month of Lee's fiscal year. Assume that none of the employees exceeded any relevant wage base.

Salaries	$	420,000
Federal income taxes to be withheld		84,000
Federal unemployment tax rate		0.60	%
State unemployment tax rate (after FUTA deduction)		5.40	%
Social security tax rate		6.20	%
Medicare tax rate		1.45	%

Required:
Calculate the income and payroll taxes for the January 2018 pay period. Prepare the appropriate journal entries to record salaries and wages expense (not paid) and payroll tax expense for the January 2018 pay period.

Answer 1

	Amount withheld from employees' gross pay	Amount paid by employer
Federal income taxes to be withheld	$                                    84,000
Social Security (6.2%)	$                                    26,040	$                        26,040
Medicare (1.45%) tax rate	$                                      6,090	$                          6,090
Federal unemployment tax		$                          2,520
State unemployment tax		$                        22,680
	$                                  116,130	$                        57,330
General Journal	Debit	Credit
Salaries and wages expense	$                                  420,000
Withholding taxes payable		$                        84,000
Social security taxes payable		$                        26,040
Medicare taxes payable		$                          6,090
Salaries and wages payable		$                      303,870
Payroll tax expense	$                                    57,330
Social security taxes payable		$                        26,040
Medicare taxes payable		$                          6,090
Federal unemployment tax Payable		$                          2,520
State unemployment tax Payable		$                        22,680