Question

The following information pertains to the payrolls of COYOTE Company for November 2019:

Employees       Wage earned                Wage earned                Federal Income            State/local

                        By 10/31/2019             in November 2019       Tax                              Income Taxes

Jane                 $116,000                     $11,000                       $2,200                         $1,100

Tom                     80,000                        8,000                           1,600                              800

Bill                        6,500                           1,500                          0                                   0

Actual state unemployment tax rate is 4%, while the federal unemployment tax rate is 1%. The taxable income limit for social security tax is $120,000/person, year, while the taxable income limit for SUTA and FUTA is $7,000/ person, year.

Instructions: Prepare the necessary journal entries for November payrolls of COYOTE Company if salaries and wages are paid in cash after withholding all payroll taxes and dues.

Answer 1

ANSWER:

Basic Information:

(i) Wages and Income Tax for the month:

Amount ($)

Employee Wages for Nov, 2019 Federal Income Tax State/Local Income Tax

Jane	$11,000	$2,200	$1,100
Tom	$8,000	$1,600	$800
Bill	$1,500	$0	$0
Total	$20,500	$3,800	$1,900

(ii) Unemployment Tax :

FUTA = $20500 * 1%

= $205

SUTA = $20500 * 4%

= $820

(iii) Social Security Tax is not to be levied as none of the employee has income more than worth $120000

So the Journal Entry will be as under:

(i) Wages A/c Dr. 20500

To Federal Income Tax 3800

To State/Local Income Tax 1900

To FUTA 205

To SUTA 820

To Wages Payable 13775

(ii) Wages Payable A/c Dr. 13775

To Cash A/c 13775