Question

I am trying to figure out the social security tax for the employees in this problem, becuase I have to post it all in a chart. I have tried multiplying by the 6.2 tax rate but my program says my answer is wrong. So, is there a different way to calculate social security tax or is there something that I am missing that the problem is asking me to do? I am not looking for answers, but just a clear formula or instruction to get to the right answer.

Nashville Publishing Company pays its employees monthly. Payments made by the company on October 31, 2019, follow. Cumulative amounts paid to the persons named prior to October 31 are also given.

1.Paul Parker, president, gross monthly salary of $20,000; gross earnings prior to October 31, $160,000.

2.Carolyn Wells, vice president, gross monthly salary of $15,000; gross earnings paid prior to October 31, $150,000.

3.Michelle Clark, independent accountant who audits the company’s accounts and performs consulting services, $16,500; gross amounts paid prior to October 31, $42,500.

4. James Wu, treasurer, gross monthly salary of $6,000; gross earnings prior to October 31, $60,000.

5. Payment to Editorial Publishing Services for monthly services of Betty Jo Bradley, an editorial expert, $6,000; amount paid to Editorial Publishing Services prior to October 31, 2019, $34,000.

INSTRUCTIONS

Use an earnings ceiling of $122,700 for social security taxes and a tax rate of 6.2 percent and a tax rate of 1.45 percent on all earnings for Medicare taxes. Prepare a schedule showing the following information:

Each employee’s cumulative earnings prior to October 31.

Each employee’s gross earnings for October.

The amounts to be withheld for each payroll tax from each employee’s earnings; the employee’s income tax withholdings are Paul Parker, $5,600; Carolyn Wells, $4,200; James Wu, $1,320.

The net amount due each employee.

The total gross earnings, the total of each payroll tax deduction, and the total net amount payable to employees.

Prepare the general journal entry to record the company’s payroll on October 31. Use journal page 22. Omit explanations.

Prepare the general journal entry to record payments to employees on October 31.

Answer 1

	Nashville Publishing Company
S. No.	Name of Employee	Cumulative amount prior to October 31	Payment made by company on october 31, 2019	Total	Social Security Tax	Medicare taxes	Income tax	Total Payroll tax deduction	Net amount payable
1	Paul Parker, president	160000	20000	180000	3553	2610	5600	11762.6	168237.4
2	Carolyn Wells, vice president	150000	15000	165000	2623	2392.5	4200	9215.1	155784.9
3	Michelle Clark, independent accountant	42500	16500	59000		855.5		855.5	58144.5
4	James Wu, treasurer	60000	6000	66000		957	1320	2277	63723
5	Betty Jo Bradley, an editorial expert	34000	6000	40000		580		580	39420
			63500	510000	6175	7395	11120	24690.2	485309.8
Date	Account		Debit	Credit
31-Oct-19	Salary Expense		63500
	Income Tax Payable			11120
	Medicare Taxes payable			7395
	Social security Tax payable			6175
	Cash			38810
	To record payroll of empoyees for the month of Octoner, 31
31-Oct-19	Payroll Tax Expense		13570
	Medicare Taxes payable			7395
	Social security Tax payable			6175
	To record employer portion of payroll taxes for the month of Octoner, 31
31-Oct-19	Medicare Taxes payable		14790
	Social security Tax payable		12350
	Cash			27140
	To record employer portion of payroll taxes for the month of Octoner, 31