Chapter 10 – Liabilities: Current, Installment Notes, and Contingencies
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166. The summary of the payroll for the monthly pay period ending July 15 indicated the following:
Sales salaries
$125,000
Federal income tax withheld
32,300
Office salaries
35,000
Medical insurance withheld
7,370
Social security tax withheld
10,200
Medicare tax withheld
2,550
Journalize the entries to record (a) the payroll and (b) the employer’s payroll tax expense for the month. The state
unemployment tax rate is 5.4%, and the federal unemployment tax rate is 0.8%. Only $25,000 of salaries are subject to
unemployment taxes.
ANSWER:
(a)
Sales Salaries Expense
125,000
Office Salaries Expense
35,000
Social Security Tax Payable
Medicare Tax Payable
Federal Income Tax Payable
Medical Insurance Payable
Salaries Payable
(b)
Payroll Taxes Expense
14,300
Social Security Tax Payable
10,200
Medicare Tax Payable
2,550
State Unemployment Tax Payable
1,350
Federal Unemployment Tax Payable
200
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.10-02 – LO: 10–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.14 – Payroll/Other Compensation
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:27 PM
DATE MODIFIED:
10/16/2017 5:43 PM
167. Excel Products Inc. pays its employees semimonthly. The summary of the payroll for December 31, indicated the
following:
Salary expense
$120,000
Federal income tax withheld
20,000
Payroll is subject to social security tax of 6% and Medicare tax of 1.5%, with no maximum earnings; $10,000 is subject to
state unemployment tax of 5.4% and federal unemployment tax of 0.8%. Prepare the journal entries for payroll tax
expense if the employees are paid on December 31 of the current year.
ANSWER:
Social Security Tax, 6% × $120,000
$7,200
Medicare Tax, 1.5% × $120,000
1,800
State Unemployment Tax, 5.4% × $10,000
540
Chapter 10 – Liabilities: Current, Installment Notes, and Contingencies
DATE MODIFIED:
10/16/2017 5:43 PM
ANSWER:
All of the cash payment controls.
Proper written authorization of additions and deletions of employees.
Proper written authorization of payroll rate changes.
Control of employee attendance records.
Verification that employees are correctly recording their time and attendance.
Blank payroll checks controlled and accounted for.
Separate payroll bank account.
POINTS:
1
DIFFICULTY:
Bloom’s: Remembering
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.10-02 – LO: 10–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.10 – Internal Control
ACCT.ACBSP.APC.14 – Payroll/Other Compensation
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:27 PM
DATE MODIFIED:
10/16/2017 5:43 PM
174. The payroll summary for December 31 for Waters Co. revealed total earnings of $80,000. All earnings are subject to
social security tax of 6.0% and Medicare tax of 1.5%. Earnings subject to state and federal unemployment compensation
taxes are $3,000 at the federal rate of 0.8% and state rate of 5.4%. Journalize the entry to record the accrual of employer
payroll taxes.
ANSWER:
Social Security Tax, 6% × $80,000
$4,800
Medicare Tax, 1.5% × $80,000
1,200
State Unemployment, 5.4% × $3,000
162
Federal Unemployment, 0.8% × $3,000
24
Total Payroll Tax Expense
$6,186
Payroll Tax Expense
6,186
Social Security Tax Payable
4,800
Medicare Tax Payable
1,200
State Unemployment Tax Payable
162
Federal Unemployment Tax Payable
24
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.10-02 – LO: 10–01
DATE CREATED:
7/22/2017 6:27 PM
Medicare ($20,000 × 1.5%)
300
Federal income tax withheld
$16,000
federal unemployment compensation tax, 0.8% on the first $7,000.
175. Perez Company has the following information for the pay period of January 15–31.
Gross payroll
$20,000
Federal income tax withheld
$2,500
Social security rate
6%
Federal unemployment tax rate
0.8%
Medicare rate
1.5%
State unemployment tax rate
5.4%
Assuming no employees are subject to ceilings for their earnings, calculate salaries payable and employer payroll tax
expense.
ANSWER:
Salaries payable:
Gross payroll
$20,000
Social security ($20,000 × 6%)
$1,200
Medicare ($20,000 × 1.5%)
300
Federal income tax withheld
2,500
4,000
$16,000
Employer payroll tax expense:
Social security ($20,000 × 6%)
$1,200
Medicare ($20,000 × 1.5%)
300
Federal unemployment ($20,000 × 0.8%)
160
State unemployment ($20,000 × 5.4%)
1,080
$2,740
Gross payroll
$20,000
Social security ($20,000 × 6%)
$1,200
Chapter 10 – Liabilities: Current, Installment Notes, and Contingencies
Medicare Tax, 1.5% × $545,000
State Unemployment Tax, 5.4% × $10,000
Part (b):
Payroll Tax Expense
Social Security Tax Payable
Calculate the employer’s payroll tax expense if:
(a) this is the first payroll of the year and the employee has no cumulative earnings for the year to date.
(b) the employee’s cumulative earnings for the year prior to this week equal $6,200.
ANSWER:
Employee wages = (40 × $45) + (8 × $67.50) = $2,340
(a)
Social security: $2,340 × 6.0%
$140.40
Medicare: $2,340 × 1.5%
35.10
State unemployment: $2,340 × 5.4%
126.36
Federal unemployment: $2,340 × 0.8%
18.72
Total
$320.58
(b)
Social security: $2,340 × 6.0%
$140.40
Medicare: $2,340 × 1.5%
35.10
State unemployment: $800 × 3.4%
43.20
Federal unemployment: $800 × 0.8%
6.40
Total
$225.10
POINTS:
1
DIFFICULTY:
Bloom’s: Applying
Moderate
QUESTION TYPE:
Subjective Short Answer
HAS VARIABLES:
False
LEARNING OBJECTIVES:
FNMN.WAJO.19.10-02 – LO: 10–01
ACCREDITING STANDARDS:
ACCT.ACBSP.APC.14 – Payroll/Other Compensation
ACCT.AICPA.FN.03 – Measurement
BUSPROG: Analytic
DATE CREATED:
7/22/2017 6:27 PM
DATE MODIFIED:
10/16/2017 5:43 PM
177. According to a summary of the payroll of Sinclair Company, $545,000 was subject to the 6.0% social security tax
and the 1.5% Medicare tax. Also, $10,000 was subject to state and federal unemployment taxes.
(a)
Calculate the employer’s payroll taxes using the following rates: state unemployment tax, 5.4%; federal
unemployment tax, 0.8%.
(b)
Journalize the entry to record the accrual of the employer’s payroll taxes.
ANSWER:
Part (a):
Social Security Tax, 6% × $545,000
$32,700