Question

In: Accounting

Lee Financial Services pays employees monthly. Payroll information is listed below for January 2021, the first...

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

Solutions

Expert Solution

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

.

.

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)

.

.

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)

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