Question

Rick is a 2010 graduate of York College, with a B.Sc. degree in Accounting.
He works at one of the Big 4 CPA firm and earned $127,500 in Gross
Earnings in 2017. Below are his 2017 payroll deductions:
Social Security	???
Medicare	???
FIT	12,500
SIT	6,500
Retirement	5,600
Charity	500
Medical	7,500
Additional Information for 2017 are:
Social Security Rate: 6.20%
Medicare Rate: 1.45%
Social Security Threshold: $127,200
Please prepare the Journal entries to record the
payroll accounting.

Answer 1

Given, Rick works at one of the Big 4 CPA firm and earns $127,500

Social Security tax rate is 6.20% of the wages upto the taxable value of $127,200

Hence Social Security Tax = $127,200 * 6.20% = $7,886.40

Medicaer tax rate is 1.45% and is taxable on all earnings of $127,500

So, Medicare Tax = $127,500 * 1.45% = $1,848.75

Journal Entries to record Payroll Accounting

Account and Titles	Debit	Credit
Salary Exense	$127,500
Social Security Payable		$7,886.40
Medicare payable		$1,848.75
FIT Payable		$12,500
SIT Payable		$6,500
Retirement		$5,600
Charity Payble		$500
Medical Payable		$7,500
Net Payroll Payable		$85,164.85
(To record payroll payable)
Net Payroll Payable	$85,164.85
Cash		$85,164.85
(To record Payroll Paid)

The employer has to pay equal share of socila security taxes which is as follows

Social Security Tax = $127,200 * 6.20% = $7,886.40

Medicare Tax = $127,500 * 1.45% = $1,848.75