Question

E13.7 (LO 1) (Payroll Tax Entries) Green Day Hardware's payroll for Nov lax Entries) Green Day Hardware's payroll for November 2020 is summa- rized below. Payroll Factory Sales Administrative Total Wages Due $120,000 32,000 36,000 $188,000 Amount Subject to Payroll Taxes Unemployment Tax FICA Federal State $120,000 $40,000 $40,000 32,000 4,000 4,000 36,000 $188,000 $44,000 $44,000 At this point in the year, some employees have already received wages in excess of those to which payroll taxes apply. Assume that the state unemployment tax is 2.5%. The FICA rate is 7.65% on an employees wages to $128,400 and 1.45% in excess of $128,400. Of the $188,000 wages subject to FICA tax, $20,000 of the sales wages is in excess of $128,400. Federal unemployment tax rate is 0.8% after credits. Income tax withheld amounts to $16,000 for factory, $7,000 for sales, and $6,000 for administrative. Instructions a. Prepare a schedule showing the employer's total cost of wages for November by function. (Round all computations to nearest dollar.) b. Prepare the journal entries to record the factory, sales, and administrative payrolls including the employer's payroll taxes.

Answer 1

a)

	Total	Factory	Sales	Administrative
Wages	$188,000	$120,000	$32,000	$36,000
FICA	$13,142	$9,180	$1,208	$2,754
Federal UC	$352	$320	$32
State UC	$1,100	$1,000	$100
Total	$202,594	$130,500	$33,340	$38,754

Working as follows:

	Factory	Sales	Administrative
Wages	$120,000	$32,000	$36,000
FICA	($120,000 × 7.65%)	[($32000-$20000) × 7.65%) + ($20000 × 1.45%)]	($36,000 × 7.65%)
Federal UC	$40000 × 0.8%	$4000 × 0.8%
State UC	$40000 × 2.5%	$4000 × 2.5%

______________________________________________________________________

b)

Prepare journal entries as follows:

Account Titles	Debit	Credit
Factory payroll
Wages & Salary	$120,000
Withholding tax payable		$16,000
FICA tax payable		$9,180
Cash		$94,820
Payroll tax expense	$10,500
FICA tax payable		$9,180
State UC		$1,000
Federal UC		$320
Sales Payroll
Wages & Salary	$32,000
Withholding tax payable		$7,000
FICA tax payable		$1,208
Cash		$23,792
Payroll tax expense	$1,340
FICA tax payable		$1,208
State UC		$100
Federal UC		$32
Administrative payroll
Wages & Salary	$36,000
Withholding tax payable		$6,000
FICA tax payable		$2,754
Cash		$27,246
Payroll tax expense	$2,754
FICA tax payable		$2,754