PART 1 Palm Corporation had total payroll of600000 For this

PART 1 Palm Corporation had total payroll of$600,000. For this payroll period, the company withheld 20% for employee income taxes. The FICA tax rate is 7.65% for wages on each employee up to their first $ 1 00,000 ofearnings, and i .45% for earnings in excess of$ 100,000. The employer must match the employee\'s FICA withholding with an equal amount as employer payroll taxes. In addition, the employer must pay state and federal unemployment taxes on the first $7,000 of employee wages earned. The state unemployment tax rate is 1.5% and the federal unemployment tax rate is 0.8%. Of the wages earned, $50,000 represented amounts earned by employees who have already exceeded the $100,000 earnings limit, and $425,000 represented amounts earned by employees who have already exceeded the $7,000 earnings limit. REQUIRED:) Prepare the general journal entry, in proper form, to record the employee payroll for the period. Prepare the general journal entry, in proper form, to record the employer payroll taxes for the period. (2)

Solution

PART 1

1. General journal entry to record the employee payroll for the period
Salaries & Wages	$600,000
Withheld Income Taxes payable	$120,000
FICA tax payable		$42,800
Net Payroll payable	$437,200
Working note:
FICA Tax Payable = $42075 + $725 = $42800
= 50000 x 1.45% = $725
= 550000 x 7.65% = $42075
2. General journal entry to record employer payroll taxes for the period
FICA Tax expenses	$42,800
State unemployment tax expenses	$2,625
Federal unemployment tax expenses	$1,400
FICA Tax payable		$42,800
State unemployment tax payable	$2,625
Federal unemployment tax payable	$1,400
Working note:
State unemployment tax = (600000-425000) x 1.5%
= 175000 *1.5%
= 2625
Federal unemployment tax = (600000-425000) x 0.8%
= 175000 *0.8%
= 1400