1 answer

The payroll of Ivanhoe Company for September 2016 is as follows. Total payroll was $444,000, of...

Question:

The payroll of Ivanhoe Company for September 2016 is as follows.

Total payroll was $444,000, of which $108,000 is exempt from Social Security tax because it represented amounts paid in excess of $118,500 to certain employees. The amount paid to employees in excess of $7,000 was $394,000. Income taxes in the amount of $79,200 were withheld, as was $9,600 in union dues. The state unemployment tax is 3.5%, but Ivanhoe Company is allowed a credit of 2.3% by the state for its unemployment experience. Also, assume that the current FICA tax is 7.65% on an employee’s wages to $118,500 and 1.45% in excess of $118,500. No employee for Ivanhoe makes more than $125,000. The federal unemployment tax rate is 0.8% after state credit.

Prepare the necessary journal entries if the wages and salaries paid and the employer payroll taxes are recorded separately.


Answers

Salaries and Wage Expense 444000
      Federal Income Taxes Payable 79200
      FICA Taxes Payable 27270 =(444000-108000)*7.65%+(108000*1.45%)
      Union Dues Payable 9600
      Cash 327930
Payroll Tax Expense 28270
      FICA Taxes Payable 27270 =(444000-108000)*7.65%+(108000*1.45%)
     Federal Unemployment Tax payable 400 =(444000-394000)*0.8%
     State Unemployment Tax payable 600 =(444000-394000)*(3.5%-2.3%)
.

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