Question

Liam Wallace is general manager of United Salons. During 2016, Wallace worked for the company all year at a $12,900 monthly salary. He also earned a year end bonus equal to 5% of his annual salary. Wallace's federal income tax withheld during 2016 was $1,032 per month, plus $774 on his bonus check. State income tax withheld came to $170 per month plus $110 on the bonus. FICA tax was withheld on the annual earnings. Wallace authorized the following payroll deductions: Charity fund contribution of 3% of total earnings and life insurance of $45 a month.

Requirement 1: Compute Wallace​'s gross​ pay, payroll​ deductions, and net pay for the full year 2016.Round all amounts to the nearest dollar.

Requirement 2: Compute United's total 2016 payroll expense for Wallace

Requirement 3: make the journal entry to record united's expense for wallaces total earnings for the year. his payroll deductions, net pay, Debit salaries and bonus expenses as appropriate. Credit liability accounts for the payroll deductions and cash for net pay.

Requirement 4: Make the journal entry to record the accrual of United's payroll tax expense for wallaces total earnings

Answer 1

ANSWER :-

Requirement 1 :-Compute Wallace​'s gross​ pay, payroll​ deductions, and net pay for the full year 2016.Round all amounts to the nearest dollar.

Salary Components		Working	Amount
Annual Salary		$ 12,900 * 12 months	$1,54,800
Add : Year end bouns		Annual Salary * 5%	$7,740
Gross pay	A		$1,62,540
Withholding deductions :
Fedral income tax on annual Salary		$ 1032 per month * 12 month	$12,384
Fedral income tax on Bouns			$774
State income tax on annual Salary		$ 170 per month * 12 month	$2,040
State income tax on Bouns			$110
FICA - OASDI		$ 1,17,000 * 6.2%	$7,254
FICA - Medicare		$ 162540 * 1.45%	$2,357
Charity Fund contribution		$ 1,62,540 * 3%	$4,876
Life insurance		$ 45 * 12 months	$540
Total with Holdings	B		$30,335
Net pay	A-B		$1,32,205

Gross Pay : $1,62,540

Payroll deduction : $30,335

Net Pay : $1,32,205

Requirement 2 : Compute United's total 2016 payroll expense for Wallace :-

Payroll Tax expenses	Calculation	Amount
FICA - OASDI	$ 1,17,000 * 6.2%	$7,254
FICA - Medicare	$ 162540 * 1.45%	$2,357
Fedral Unemployment taxes payable	$ 7000 * 0.6%	$42
Sate Unemployment taxes payable	$ 7000 * 5.4%	$378
Total payroll tax expense		$10,031

Requirement 3 :- make the journal entry to record united's expense for wallaces total earnings for the year. his payroll deductions, net pay, Debit salaries and bonus expenses as appropriate. Credit liability accounts for the payroll deductions and cash for net pay.

Date	Particulars	Debit	Credit
	Salaries Exp.	$1,62,540
	Bouns Exp.	$7,740
	Fedral income tax on annual Salary		$12,384
	Fedral income tax on Bouns		$774
	State income tax on annual Salary		$2,040
	State income tax on Bouns		$110
	FICA - OASDI		$7,254
	FICA - Medicare		$2,357
	Charity Fund contribution		$4,876
	Life insurance		$540
	Cash		$1,39,945

Requirement 4 : Make the journal entry to record the accrual of United's payroll tax expense for wallaces Total earnings :

Date	Particulars	Debit	Credit
	Payroll Tax Exp.	$10,031
	FICA - OASDI		$7,254
	FICA - Medicare		$2,357
	Fedral Unemployment taxes payable		$42
	Sate Unemployment taxes payable		$378