Question

Ehrlich Co. began business on January 2, 20Y8. Salaries were paid to employees on the last day of each month, and social security tax, Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 20Y9, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees' earnings records were inadvertently destroyed.

None of the employees resigned or were discharged during the year, and there were no changes in salary rates. The social security tax was withheld at the rate of 6.0% and Medicare tax at the rate of 1.5%. Data on dates of employment, salary rates, and employees’ income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records:

Employee	Date First Employed	Monthly Salary		Monthly Income Tax Withheld
Arnett	Jan. 2	$3,100		$434
Cruz	Oct. 1	5,300		954
Edwards	Apr. 16	2,400		300
Harvin	Nov. 1	2,200		275
Nicks	Jan. 16	5,800		1,305
Shiancoe	Dec. 1	3,700		574
Ward	Feb. 1	6,900		1,484

Required:

1. Calculate the amounts to be reported on each employee's Wage and Tax Statement (Form W-2) for 20Y8.

Note: Round amounts to the nearest whole dollar and enter all amounts as positive values.

Employee	Gross Earnings		Federal Income Tax Withheld		Social Security Tax Withheld		Medicare Tax Withheld
Arnett	$		$		$		$
Cruz
Edwards
Harvin
Nicks
Shiancoe
Ward
					$		$

2. Calculate the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee’s earnings; (d) federal unemployment compensation at 0.6% on the first $10,000 of each employee’s earnings; (e) total.

Note: Round amounts to the nearest whole dollar and enter all amounts as positive values.

(a)	$
(b)
(c)
(d)
(e)	$

According to a summary of the payroll of Guthrie Co., $760,000 was subject to the 6.0% social security tax and the 1.5% Medicare tax. Also, $44,000 was subject to state and federal unemployment taxes.

	Required:
A.	Calculate the employer’s payroll taxes, using the following rates: state unemployment, 5.4%; federal unemployment, 0.6%.
B.	On December 31, journalize the entry to record the accrual of payroll taxes. Refer to the Chart of Accounts for exact wording of account titles.

Answer 1

Business Commencement Date = 02.01.2018
Salaries Paid - Last Day of the Month
Tax Deductions
Social Security Tax
Medicate Tax
Federal Income Tax
Employee Hired in middle of the month = Paid Half of the Salary

Employee's Wage and Tax Statement (Form W-2) for 20Y8 Employee Date First Employed Gross Earnings Calculation Gross Earnings Medicare | Tax Withheld Net Salary Paid (Formula) @1.5% Arnett Cruz Edwards Harvin Nicks Shiancoe Ward Jan. 2 Oct. 1 Apr. 16 Nov. 1 Jan. 16 Dec. 1 Feb. 1 (3100*30/31)+(3100*11) 5300*3 (2400*15/30)+(2400*8) 2200*2 (5800*15/30)+(5800*11) 3700*1 6900*11 37,100.0 15,900.0 20.400.0 4,400.0 66,700.0 3,700.0 75,900.0 Federal Social Security Income Tax Tax Withheld Withheld @6% 5,194.0 2,226.0 2,862.0 954.0 2.550.0 | 1,224.0 550.0 264.0 15.007.5 4.002.0 574.0 222.0 16,324.0 4,554.0 556.5 238.5 306.0 66.0 1,000.5 55.5 1,138.5 29,123.5 11,845.5 16,320.0 3,520.0 46,690.0 2,848.5 53,883.5 Total 224,100 43,062 13,446 3,362 164,231

Employer payroll taxes for the year Taxes Amount Social Security Medicare Tax State unemployment compensation at 5.4% Federal unemployment compensation at 0.6% 13,446 3,362 3,137 349 I Total 20,294

Calculation of State and Federal Unemployement Taxes Employee Gross Earnings Federal unemployment compensation at 0.6% 60 Arnett Cruz Edwards Harvin Nicks Shiancoe Ward 60 State unemployment compensation at 5.4% 540 540 540 238 540 200 540 37,100.0 15,900.0 20,400.0 4.400.0 66,700.0 3,700.0 75,900.0 60 Total 224,100 3,137 349

For Guthrie Co. Limited Calculation of Taxes Taxes Social Security Medicare Tax State unemployment compensation at 5.4% Federal unemployment compensation at 0.6% Amount 45,600 11,400 2.376 264 Total 59,640

Journal Entry of Accrual of Payroll Taxes Sr. No. Dr. Cr. 48,240 Entry Payroll Tax Expenses FICA Tax Withheld Federal Unemployment Taxes State Unemployment Taxes 45,600 264 2,376 2 11,400 Wages Payable Health Insurance 11,400