Question

In: Accounting

Grady Company has the following data available for its March 31, 2013 payroll: Gross wages: $180,000...

Grady Company has the following data available for its March 31, 2013 payroll:

Gross wages: $180,000
Federal Income Taxes Withheld: $43,200

The entire amount of gross wages is subject to FICA withholdings and FICA matching, each at 7.65% (Social Security of 6.2% and Medicare of 1.45%). The federal unemployment tax rate is 3.5%. All wages are subject to the federal unemployment tax (FUTA). There is no state unemployment tax.

1. Calculate the FICA withholdings. Please show your calculations.

2. Calculate FUTA. Please show your calculations.

3. Calculate net wages. Please show your work.

4.Prepare the journal entry to record the wages and withholdings.

5.Write the journal entry for payroll taxes.

6. What is the total cost of the employees to the company (show your calculations).

Expert Solution

1. Calculate the FICA withholdings. Please show your calculations.

Given Gross wages = $180,000

FICA witholdings at 7.65%(Social security Tax @ 6.2% + medicare @1.45%) = $180,000 * 7.65% = $13,770

Hence, FICA itholdings = $13,770

2. Calculate FUTA. Please show your calculations.

FUTA @3.5% = $180,000 * 3.5% = $6,300

3. Calculate net wages. Please show your work.

The taxes deducted from employee wages are FICA taxes, Federal Income taxes and any state income taxes payable

Net Wages = Gross Wages - FICA Taxes - Federal Income Taxes - State Income Taxes

= $180,000 - $13,770 - $43,200

Net Wages = $123,030

4.Prepare the journal entry to record the wages and withholdings.

Particulars	Debit	Credit
Wages Expense	$180,000
FICA		$13,770
Federal Income Taxes		$43,200
Wages Payable		$123,030
[To record the wages and witholding taxes]

5.Write the journal entry for payroll taxes.

Particulars	Debit	Credit
FICA	$13,770
Federal Income Taxes	$43,200
FICA (Employers portion)	$13,770
FUTA	$6,300
Cash A/c		$77,040
[To record Payroll taxes paid]

6. What is the total cost of the employees to the company (show your calculations).

Cost of the Employees to the company = Gross Wages + Employer's portion of FICA + FUTA paid by employer

= $180,000 + $13,770 + $6,300

Cost of the Employees to the company = $200,070

ekkarill92 answered 1 year ago

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