Question

According to a summary of the payroll of Guthrie Co., $600,000 was subject to the 6.0% social security tax and the 1.5% Medicare tax. Also, $56,000 was subject to state and federal unemployment taxes.

Required:

a.	Compute the employer’s payroll taxes, using the following rates: state unemployment, 5.4%; federal unemployment, 0.6%.
b.	On December 31, journalize the entry to record the accrual of payroll taxes. Refer to the chart of accounts for the exact wording of the account titles. CNOW journals do not use lines for journal explanations. Every line on a journal page is used for debit or credit entries. CNOW journals will automatically indent a credit entry when a credit amount is entered.

Chart of Accounts

CHART OF ACCOUNTS
Guthrie Co.
General Ledger
ASSETS 110 Cash 111 Accounts Receivable 112 Interest Receivable 113 Notes Receivable 115 Merchandise Inventory 116 Supplies 118 Prepaid Insurance 120 Land 123 Building 124 Accumulated Depreciation-Building 125 Office Equipment 126 Accumulated Depreciation-Office Equipment LIABILITIES 210 Accounts Payable 213 Interest Payable 214 Notes Payable 215 Salaries Payable 216 Social Security Tax Payable 217 Medicare Tax Payable 218 Employees Federal Income Tax Payable 219 Employees State Income Tax Payable 221 Retirement Savings Deductions Payable 224 Federal Unemployment Tax Payable 225 State Unemployment Tax Payable 226 Vacation Pay Payable 227 Unfunded Pension Liability 228 Product Warranty Payable 229 EPA Fines Payable 230 Litigation Claims Payable EQUITY 310 Owner, Capital 311 Owner, Drawing	REVENUE 410 Sales 610 Interest Revenue EXPENSES 510 Cost of Merchandise Sold 520 Salaries Expense 524 Depreciation Expense-Building 525 Delivery Expense 526 Repairs Expense 529 Selling Expenses 531 Rent Expense 532 Depreciation Expense-Office Equipment 533 Insurance Expense 534 Supplies Expense 535 Payroll Tax Expense 536 Vacation Pay Expense 537 Pension Expense 538 Cash Short and Over 539 Product Warranty Expense 540 Damage Awards and Fines 541 Miscellaneous Expense 710 Interest Expense

First Question

a. Compute the employer’s payroll taxes, using the following rates: state unemployment, 5.4%; federal unemployment, 0.6%.

Journal

b. On December 31, journalize the entry to record the accrual of payroll taxes. Refer to the chart of accounts for the exact

Answer 1

a)
Employer's Payroll Taxes
Social Security Tax (6% x $600,000)	$ 36,000.00
Medicare Tax (1.5% x $600,000)	$   9,000.00
State Unemployment Tax ($56,000 x 5.4%)	$   3,024.00
Federal Unemployment Tax ($56,000 x 0.6%	$      336.00
Total Employer's Payroll Taxes	$ 48,360.00
b)
Account Titles	Debit	Credit
Payroll Tax Expenses	$ 48,360.00
Social Security Tax payable		$ 36,000.00
Medicare Tax Payable		$   9,000.00
State Unemployment Tax Payable		$   3,024.00
Federal Unemployment Tax Payable		$      336.00