Question

Nashville Publishing Company pays its employees monthly. Payments made by the company on October 31, 2019, follow. Cumulative amounts paid to the persons named prior to October 31 are also given.

1. Paul Parker, president, gross monthly salary of $20,000; gross earnings prior to October 31, $160,000.
2. Carolyn Wells, vice president, gross monthly salary of $15,000; gross earnings paid prior to October 31, $150,000.
3. Michelle Clark, independent accountant who audits the company’s accounts and performs consulting services, $16,500; gross amounts paid prior to October 31, $42,500.
4. James Wu, treasurer, gross monthly salary of $6,000; gross earnings prior to October 31, $60,000.
5. Payment to Editorial Publishing Services for monthly services of Betty Jo Bradley, an editorial expert, $6,000; amount paid to Editorial Publishing Services prior to October 31, 2019, $34,000.

Required:

1. Use an earnings ceiling of $122,700 for social security taxes and a tax rate of 6.2 percent and a tax rate of 1.45 percent on all earnings for Medicare taxes. Prepare a schedule showing the following information:
   1. Each employee’s cumulative earnings prior to October 31.
   2. Each employee’s gross earnings for October.
   3. The amounts to be withheld for each payroll tax from each employee’s earnings; the employee’s income tax withholdings are Paul Parker, $5,600; Carolyn Wells, $4,200; James Wu, $1,320.
   4. The net amount due each employee.
   5. The total gross earnings, the total of each payroll tax deduction, and the total net amount payable to employees.
2. Prepare the general journal entry to record the company’s payroll on October 31.
3. Prepare the general journal entry to record payments to employees on October 31.

Journal entry worksheet

• Record the company's payroll to be paid at a later date.

Note: Enter debits before credits.

	Date General Journal Debit Credit Oct 31, 2019 Employee income tax payable Medicare tax payable

Journal entry worksheet

• Record the entry to summarize payment of the payroll.

Note: Enter debits before credits.

	Date General Journal Debit Credit Oct 31, 2019

Answer 1

	Employee		Cumulative earnings prior to Oct 31.	Gross earnings	Income tax withholdings	Social security taxes payable	Medicare taxes payable	Net amount payable
			a	b	c	d=b*6.2%subject to a < 122700	e=b*1.45%
	Paul Parker		160000	20000	5600	0	290	14110
	Carolyn wells		150000	15000	4200	0	217.5	10582.5
	James Wu		60000	6000	1320	372	87	4221
				41000	11120	372	594.5	28913.5
	Michelle clark is an independent auditor.Hence, he is not an employee of the company and will not be in payroll
	Jo Bradley is an independent editorial expert.Hence, he is not an employee of the company and will not be in payroll
	Date	General journal			Debit	Credit
	Oct 31.	Salaries expense			41000
		Employee income tax payable				11120
		Social security tax payable				372
		Medicare tax payable				594.5
		Salaries payable				28913.5
		(Payroll recorded)
	Oct 31.	Salaries payable			28913.5
		Cash				28913.5
		(Paid to employees)