4277-6-8PPB

AID: 1825 | 29/03/2013

(a) The employees of Company P earn wages of $15,600 for the two weeks ending April
15.

The amount Withheld for Federal Income Tax = $424.00

The total taxable payroll for FICA (Federal Insurance Contribution Act) HI
(Hospital Insurance)
= $15,600.00

The total taxable payroll for FICA (Federal Insurance Contribution Act) OASDI
(Old age, Survivors, and Disability Insurance program)
= $15,600.00

The total taxable payroll for FUTA (Federal Unemployment Tax Act) and SUTA
(State Unemployment Tax Act) = $10,800.00

The state contribution rate of the company is .9%

All the employees are subject to state unemployment contribution of 0.5%

Compute the amount of all deductions from employees payroll, and the amount of
net cash payment to the employees as follows:

Compute FICA tax(OASDI) as follows:

Taxable wages for OASDI
OASDI rate

= $15,600.00
= 6.2%

OASDI Tax Taxable wages OASDI rate

$15,600.00

6.2
100

$967.20

(1)

Compute FICA tax (HI) as follows:

Taxable wages for HI
OASDI rate

= $15,600.00
= 1.45%

HI Tax Taxable wages HI rate

$15,600.00

1.45
100

$226.20

(2)

The amount of Federal Income Tax = $424.00

Compute the amount of employee contribution to state unemployment

contribution (SUTA) as follows:
Taxable wages for SUTA
Contribution rate

(3)

= $10,800.00
= 0.5%

Employees SUTA Tax Taxable wages SUTA rate

$10,800.00

0.5
100

$54.00

(3)

Compute the net cash (wages) paid to the employee as follows:

Net Cash Wages paid Gross wages

FICA-OASDI 1 FICA-HI 2


FIT 3 Employees SUTA
$967.20 $226.20

$424.00 54.00

$15,600.00

$15,600.00 $1,671.40
$13,928.60

(5)

Record the journal entry in the book of Company P on April 15 for payment of wages and
payroll taxes as follows:

Description

Post. Ref.

Journal
Date

1 April 15 Payment of Wages

Debit
($)

Credit
($)

1 5 6 0 0 00

FICA Taxes Payable

-OASDI
FICA Taxes Payable
-HI
Employees FIT
Payable
Employees SUTA
tax payable
Cash
(To record the
payment of wages and
the liability for the
employees' taxes
withheld.)

9 6 7 20

2 2 6 20

4 2 4 00

5 4 00

1 3 9 2 8 60

Wages is an expense and increased by $15,600.00. Therefore, debit wages with

$15,600.00

FICA Taxes Payable - OASDI is a liability an increased by $967.20. Therefore,

credit FICA Taxes Payable - OASDI with $967.20

FICA Taxes Payable - HI is a liability and increased by $226.20Therefore, credit

FICA Taxes Payable - HI with $226.20.

Employees FIT Payable is a liability and increased by $424.00. Therefore, credit

Employees FIT Payable with $424.00.

Employees SUTA Payable is a liability and increased by $54.00. Therefore, credit

Employees SUTA Payable with $54.00.

Cash is an asset and decreased by $13,928.60 Therefore, credit cash with

$13,928.60.

Compute the amount of payroll taxes as follows:

Total Payroll taxes FICA-OASDI FICA-HI SUTA FUTA

Compute the amount of SUTA tax as follows:
Compute the contribution of employer to state unemployment fund:
Taxable salary for SUTA
SUTA tax rate

= $10,800
= 3.9%

SUTA Tax Taxable wages SUTA TAX rate

$10,800.00

3.9
100

$421.20
Compute the contribution of employees to state unemployment fund:
Taxable salary for SUTA
SUTA tax rate

= $10,800
= 0.5%

SUTA Tax Taxable wages SUTA TAX rate

$10,800.00

0.5
100

$54.00
So, the total amount of SUTA tax Emploer's contribution
Employees contribution
$421.20 $54.00
$475.20

(6)

Compute the amount of net FUTA tax as follows:

Taxable salary for FUTA
FUTA tax rate

= $10,800
= 0.8%

Net FUTA Tax Taxable wages FUTA TAX rate

$10,800.00
$86.40

0.8
100

(7)

So, the total Payroll taxes FICA-OASDI FICA-HI SUTA FUTA

$967.20 $226.20 $475.20 $84.40
$1,753.00

(8)

Journal
Date

Description

1 April15 Payroll Taxes

FICA Taxes Payable
-OASDII
FICA Taxes Payable
-HI
SUTA taxes payable
FUTA taxes payable
(To record the payroll
taxes and liabilities of
the employer )

Post. Ref.

Record the journal entry in the book of Company P on April 15 for the electronic transfer
of payroll taxes as follows:

Debit
($)

Credit
($)

1 7 5 3 00

8
9 6 7 20

2 2 6 20
4 7 5 20
8 6 40

2
6
7

Payroll taxes are expenses and increased by $1,753.00. Therefore, debit Payroll
taxes with $1,753.00.

FICA Taxes Payable - OASDI is a liability and increased by $967.20. Therefore,

credit FICA Taxes Payable - OASDI with $967.20

FICA Taxes Payable - HI is a liability an increased by $226.20. Therefore, credit

FICA Taxes Payable - HI with $226.20

SUTA taxes payable is a liability and increased by $475.20. Therefore, credit

SUTA taxes payable with $475.20

FUTA taxes payable is a liability and increased by $86.40. Therefore, credit

FUTA taxes payable with $86.40.