Attached file is the solution of my professor. It is a different solution from what I have asked yesterday here. Could you pls take a look if that attached solution is correct, please explain to me:
Why must calculate Social security first? Then (gross pay - social security tax) x income tax rate? Can we calculate first Income tax first?
He does an other separate entry for Employer payroll tax. Since the first entry, sum of them ( social security + income tax + salary) equal to 254,000 already, Where & how 254,000 * 32% of employer payroll tax come from? Because if we sum 4 of them, it s over gross pay 254,000.
Thank you very much.
Homenet Page Layout Formdas ta Data Review mova DF Sert & Find & Clear FiterSelet\" formatting as Table syles Cels Debit Credit Debited account Credited account (254000-Security payable)\"26% 58,115.20 30,480.00 (254000*12%) 165,404.80 remain after deduct that abve 2 254,000.00 Employee income tax payable Social security payable Salary payable Salary expense Employer payroll tax expens Social security payable Employee income tax payab Cash Social security payable Cash Salary payable 81,280.00 81,280.00 254000\"32% 58,115.20 58,115.20 111,760.00 111,760.00 165,404.80 165,404.80 Cash
First answer to your question: the above solution to the problem is correct
Here, we calaculate social security tax first and deduct it before calculating employee income tax because social security is not a income for the employee but the tax we don\'t deduct social security it would mean that we are putting tax on tax.
The employer also has to pay his share in social security and other taxes to government. Here he has to pay 32% on the salries has given in the question.
Has the amount of 32% i.e. 81280 is expense to the emplyer to be payable to govt
He credits social security payable and making it a liability and debit employee payroll expense has it is expense to employer for hiring employees
In next entry he pays tax collected by him to the government
In next entry he pays both his share and tax collect by him from employee to govt
In next entry he paid balance amount to employee..
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