Question

Calculation of Taxable Earnings and Employer Payroll Taxes and Preparation of Journal Entry

Selected information from the payroll register of Joanie's Boutique for the week ended September 14, 20--, is as follows: Social Security tax is 6.2% on the first $128,400 of earnings for each employee. Medicare tax is 1.45% of gross earnings. FUTA tax is 0.6% and SUTA tax is 5.4% on the first $7,000 of earnings.

				Taxable Earnings
Employee Name	Cumulative Pay Before Current Earnings		Current Gross Pay	Unemployment Compensation	Social Security
Jordahl, Stephanie		$6,500	$1,220
Keesling, Emily		6,010	1,070
Palmer, Stefan		55,200	2,380
Soltis, Robin		54,460	2,320
Stout, Hannah		28,710	2,060
Xia, Xu		127,300	3,660

1. Calculate the amount of taxable earnings for unemployment, Social Security, and Medicare taxes.

		Taxable Earnings
Employee Name	Current Earnings	Unemployment Compensation	Social Security
Jordahl, Stephanie	$	$	$
Keesling, Emily
Palmer, Stefan
Soltis, Robin
Stout, Hannah
Xia, Xu
Total	$	$	$

Social Security tax	$
Medicare tax
FUTA tax
SUTA tax
Total employer payroll taxes	$

2. Prepare the journal entry to record the employer's payroll taxes as of September 14, 20--.

Page:  

	DATE	ACCOUNT TITLE	DOC. NO.	POST. REF.	DEBIT	CREDIT
1	20-- Sept. 14						1
2							2
3							3
4							4
5							5

Answer 1

1
	Current	Taxable Earnings
	Earnings	Unemployment	Social
Employee Name		Compensation	Security
Jordahl, Stephanie	1220	500	1220
Keesling, Emily	1070	990	1070
Palmer, Stefan	2380	0	2380
Soltis, Robin	2320	0	2320
Stout, Hannah	2060	0	2060
Xia, Xu	3660	0	1100
Total	12710	1490	10150
Social Security tax	629.30	=10150*6.2%
Medicare tax	184.30	=12710*1.45%
FUTA tax	8.94	=1490*0.6%
SUTA tax	80.46	=1490*5.4%
Total employer payroll taxes	903.00

2
	ACCOUNT TITLE	DOC NO.	POST. REF.	DEBIT	CREDIT
20-- Sept. 14	Payroll tax expense			903.00
	Social Security tax payable				629.30
	Medicare tax payable				184.30
	FUTA tax payable				8.94
	SUTA tax payable				80.46

Workings:
Unemployment taxable earnings:
Jordahl, Stephanie	500	=7000-6500
Keesling, Emily	990	=7000-6010
Taxable Social Security:
Xia, Xu	1100	=128400-127300