Question

(Payroll Tax Entries) The payroll of Grich Company for September 2014 is as follows. Total payroll was $486,000, of which $122,000 is exempt from Social Security tax because it represented amounts paid in excess of $128,400 to certain employees. The amount paid to employees in excess of $7,000 was $414,000. Income taxes in the amount of $85,000 were withheld, as was $8,800 in union dues. The state unemployment tax is 3.5%, but Grich Company is allowed a credit of 2.3% by the state for its unemployment experience. Also, assume that the current F.I.C.A. tax is 7.65% on an employee's wage to $128,400 and 1.45% in excess of $128,400. No employee for Grich Company makes more than $125,000. The federal unemployment tax rate is 0.8% after state credit.

Q. The amount of the taxes (income taxes, social security taxes, medicare taxes, unemployment taxes) to be paid by the employees of Grich for September 2014 salaries is

a. below $90,000

b. between $110,000 through $90,000

c. between $120,000 through $110,000.01

d. larger than $120,000

Q. Grich's payroll tax expense for September 2014 is

a. below $30,000

b. between $30,000.01 and $30,500

c. between $30,500.01 and $31,100

d. above $31,100

Answer 1

Wages and Salary Expense = $486,000

Withholding tax                                                      85000

FICA tax

(486000-122000) 7.65% = 27,846

122000*1.45% = 1769 = 27846+1769                    29615

Union dues Payable                                                 8800

Cash                                                                           362585        

Income Tax = Withholding tax+ social security taxes + Medicare taxes + unemployment taxes

= 85000+29615+576+ 8800+ 864 = 124855

The answer is

d. larger than $120,000

Payroll tax expense                                         31055

FICA taxes Payable                                                                   29615

Federal unemployment Tax payable                                              576

(486000-414000) *0.8%

State unemployment Tax payable                                                 864

72000 *(3.5%-2.3%)

The answer is 31055 and it falls in the category c.

c. between $30,500.01 and $31,100