Question

Ada Marion earns a salary of $7,500 per month during the year. FICA taxes are 7.65% on the first $127,200 of gross earnings. Federal unemployment insurance taxes are 6.2% of the first $7,000; however, a credit is allowed equal to the state unemployment insurance taxes of 5.4% on the $7,000. During the year, $25,600 was withheld for federal income taxes and $5,700 was withheld for state income taxes.

Prepare a journal entry summarizing the payment of Ada’s total salary during the year. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit

Prepare a journal entry summarizing the employer payroll tax expense on Ada’s salary for the year. (Credit account titles are automatically indented when the amount is entered. Do not indent manually. If no entry is required, select "No Entry" for the account titles and enter 0 for the amounts.) Account Titles and Explanation Debit Credit

Determine the cost of employing Ada for the year. Total cost of employment $

Answer 1

Answer:

Account Title and Explanation	Debit	Credit
Salary Expense (7,500*12)	90,000
Federal Income Taxes Payable		25,600
State Income Taxes Payable		5,700
FICA Taxes Payable   (127,200*7.65%)		9,731
Salary and Wages Payable (Balance)		48,969
(Entry to record payment of total salary)
Payroll Tax Expense	10,165
FICA Taxes Payable		9,731
Federal Unemployment Taxes Payable (7,000*0.8%)		56
State Unemployment Taxes Payable (7000*5.4%)		378
(Entry to record employer payroll taxes )

(c)     The total cost of employment is: $90,000 + $10,165 = $100,165