ross salaries earned by employees December 2931 ncome taxes

ross salaries earned by employees (December 29-31) ncome taxes withheld from employees (December 29-31) FICA taxes withheld from employees (December 29-31) $7,200 1,100 420 $5.680 et payment to employees (made on December 31) The employees were paid $5,680 on December 31, 2015, but the withholdings have not yet been remitted nor have the matching employer FICA contributions Required: Part a. Compute the total payroll costs relating to the period from December 29-31. (Assume $560 in total unemployment taxes.) Part b. Show December 31 to adjust for salaries and wages relating to December 29-31 2015. Part c. Show the accounting equation effects and give the journal entries on December 31 to adjust for payroll taxes relating to December 29-31, 2015 the accounting equation effects and give the journal entries on

Solution

1. Calculaiton of Payrolll taxes payable.

Gross Salary

FICA (Employee)

(1)

Federal Withholding Tax (2)

Net Pay

FICA Tax Employer (3)

State & Federal Unemployment taxes payable (Employer)

(4)

Total Payroll Taxes (1+2+3+4)

7,200

420

1,100

5,680

420

560

2,500

2. Journal Entries

Date

Account

Debit

Credit

Salaries & Wages Expense

TO FICA Tax Payable

TO Federal income tax payable

TO Salary & Wages Payable

7,200

420

1,100

5,680

Payroll Tax Expense

TO FICA Tax Payable (Employer)

TO State & Federal Unemployment Tax Payable

980

420

560

NOTE:

A. State & Federal unemployment taxes are assumed to be $560 since the rates of same are not available.

B. FICA Taxes are paid in equal proportion by employee & employer. Therefore, $420 is payable by emmployer also.

C. First journal entry is related to salary and wages and second journal entry is for payroll taxes by employer.

Gross Salary	FICA (Employee) (1)	Federal Withholding Tax (2)	Net Pay	FICA Tax Employer (3)	State & Federal Unemployment taxes payable (Employer) (4)	Total Payroll Taxes (1+2+3+4)
7,200	420	1,100	5,680	420	560	2,500