Question

Lee Financial Services pays employees monthly. Payroll information is listed below for January 2021, the first month of Lee’s fiscal year. Assume that none of the employees exceeded any relevant base of pay, such that all benefit percentages apply to the entire $540,000 payroll.

Salaries	$	540,000
Federal income taxes to be withheld		108,000
Federal unemployment tax rate		0.60	%
State unemployment tax rate (after SUTA deduction)		5.40	%
Social security tax rate		6.20	%
Medicare tax rate		1.45	%

Required:
Calculate the income and payroll taxes for the January 2021 pay period. Prepare the appropriate journal entries to record salaries expense and payroll tax expense for the January 2021 pay period.

part 2

Record salaries expense for January 2021 pay period.

Record payroll tax expense for January 2021 pay period.

Part 1:

	Amount withheld from employee's gross pay	Amount Paid by employer
Federal Income taxes to be withheld
Social Security Tax
Medicare Tax
Federal unemployment tax
State Unemployment

Answer 1

Tax	Amount withheld from employers gross pay	Amount paid by employer
Federal income taxes to be withheld	$108,000
Social Security Tax                     [$540,000 x 6.20%]	$33,480	$33,480
Medicare Tax                              [$540,000 x 1.45%]	$7,830	$7,830
Federal unemployment tax           [$540,000 x 0.60%]		$3,240
State unemployment tax               [$540,000 x 5.40%]		$29,160
Total	$149,310	$73,710

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Record salaries expense for January 2018 pay period
Event	General Journal	Debit	Credit
1	Salaries and Wages Expense            [Gross pay]	$540,000
	Withholding taxes payable           [Income tax]		$108,000
	Social Security Taxes payable       [$540,000 x 6.20%]		$33,480
	Medicare Taxes payable               [$540,000 x 1.45%]		$7,830
	Salaries and Wages payable       [Gross pay - Deductions = $540,000 - $108,000 - $33,480 - $7,830]		$390,690
	(To record the salaries expense)

.

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Record the payroll tax expense
Event	General Journal	Debit	Credit
2	Payroll tax Expense                            [$33,480 + $7,830 + $3,240 + $29,160]	$73,710
	Social Security Taxes payable       [$540,000 x 6.20%]		$33,480
	Medicare Taxes payable               [$540,000 x 1.45%]		$7,830
	Federal Unemployment Tax Payable            [$540,000 x 0.6%]		$3,240
	State Unemployment Tax Payable                 [$540,000 x 5.4%]		$29,160
	(To record the payroll tax expense)