Question

The August 2020 payroll of Clarkson, Inc. was $752,000 of which $86,000 represented amounts paid in excess of $137,700 to certain employees. The amount paid to employees in excess of $7,000 was $519,000. Income taxes withheld were $217,000, and union dues withheld were $18,000. The state unemployment tax is 1.2%, the federal unemployment tax is .8%. The state unemployment tax and federal unemployment tax are both calculated on the first $7,000 of employee wages.

1. The cash paid to employees would be...

2. The amount of Payroll Tax Expense recorded by Clarkson would be...

Answer 1

The August 2020 payroll of Clarkson, Inc.

Workings:

Gross Amount of payroll = 752000

Less The amount of Payroll Tax Exp.

Income tax with held. = 217000

Union dues withheld. = 18000

State unemployment tax 1.2% = 2796

Federal unemployment tax 0.8% =1864

Social security tax 6.2 %. =41292

Total payroll tax. =$ 280952

Cash paid to employees = $ 471048

Ie.(752000-280952=471048)

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Answers:

1. The cash paid to employees would be. $ 471048

2. The amount of Payroll Tax Expense recorded by Clarkson would be...$ 280962

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Calculations:1 unemployment tax

unemployment tax are both calculated on the first $7,000 of employee wages.

The amount paid to employees in excess of $7,000 was $519,000.So tax applied rest of the amount.ie.(752000-519000) x 1.2 % for state and (752000-519000) x 0.8% for federal.

Calculation 2 Social security tax .

Total amount is $752,000 of which $86,000 represented amounts paid in excess of $137,700 to certain employees.social security tax applied to the amount up to 137700/-

Ie ($752000- 86000) x 6.2%=& 41292 ( see below notes)

Notes

Social Security tax is not applied on wages, salaries, and bonuses in excess of the stipulated maximum amount of wages that are subject to Social Security taxes. As of 2018, the Social Security tax rate is 12.4%. Half of the tax is paid by the employer, and the employee is responsible for paying the other half, which is 6.2%. For earnings in 2020, the maximum amount of income that taxpayers must pay Social Security tax on is $137,700. In other words, the taxable wage base is $137,700.