P1 The following information pertains to the payrolls of A C

P1. The following information pertains to the payrolls of A Company for the month of July 2017: ployee Wage earned State/local Wage earned in July 2017 Em Federal Income By 6/30/2017 Tax ncome laxes $ l 10,000 $900 250 50 $18,000 Jane Tom Bill 60,000 6,000 10,000 1,100 $2,500 1,200 300 Actual state unemployment tax rate is 4%, while the federal unemployment tax rate is 0.08%. The taxable income limit for social security tax is $118,000/person, year, while the taxable income limit for SUTA and FUTA is $7,000/ person, year. Instructions: Prepare the necessary journal entries for July payrolls of A Company if salaries and wages are paid in cash after withholding all payroll taxes and dues.

Solution

Notes

Social Security Tax is 6.2 % of Earnings up to 118,000.

For Jane - 8000*6.2% = 496

For Tom - 10000*6.2% = 620

For Bill = 1100*6.2% = 68.20

Medicare Tax = 1.45% of Earnings

Notes:

We would have already paid SUTA and FUTA for all the employees except for Bill which is captured in the above transaction.

SUTA = 1000*4% =400

FUTA = 1000*0.08% = .80

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Employee	Gross Earnings	Federal Income Tax	State Income Income Tax	Social Security Tax	Medicare Tax	Net Earnings
Jane	$          18,000.00	$    2,500.00	$        900.00	$          496.00	$        261.00	$       13,843.00
Tom	$          10,000.00	$    1,200.00	$        250.00	$          620.00	$        145.00	$         7,785.00
Bill	$             1,100.00	$       300.00	$           50.00	$            68.20	$          15.95	$             665.85
	$          29,100.00	$    4,000.00	$     1,200.00	$      1,184.20	$        421.95	$       22,293.85