Question

In: Accounting

Total payroll of Watson Co. was $1,840,000, of which $320,000 represented amounts paid in excess of...

Total payroll of Watson Co. was $1,840,000, of which $320,000 represented amounts paid in excess of $106,800 to certain employees. The amount paid to employees in excess of $7,000 was $1,440,000. Income taxes withheld were $450,000. The state unemployment tax is 1.2%, the federal unemployment tax is .8%, and the F.I.C.A. tax is 7.65% on an employee’s salaries and wages to $106,800 and 1.45% in excess of $106,800.

Instructions

(a) Prepare the journal entry for the salaries and wages paid.

(b) Prepare the entry to record the employer payroll taxes.

Expert Solution

A.

No	Account Title and Explanation	Debit	Credit
a	Salaries and Wages Expense	$1,840,000
	Withholding Taxes Payable		$450,000
	FICA Taxes Payable		$120,920*
	Cash		$1,269,080

Explanation;

* [($1,840,000 - $320,000) × 7.65 % ] + [$320,000 × 1.45 %]

= $1,520,000 × 7.65 % + $4,640 = $120,920

B. Employer Payroll Tax Journal Entry

No.	Account Title and Explanation	Debit	Credit
b	Payroll Tax Expense	$128,920
	FICA Taxes Payable		*$120,920
	FUTA Taxes Payable		$3,200
	SUTA Taxes Payable		$4,800

Calculations;

FICA Taxes Payable ;

($1,520,000 × 7.65 % ) + ($320,000 × 1.45%)

$116,280 + $4,640 = $120,920

FUTA Taxes Payable

($1,840,000 - $1,440,000 ) × .8% = $3,200

SUTA Taxes Payable

$400,000 × 1.2 % = $4,800

ekkarill92 answered 2 years ago

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