Using the data in situation a of Exercise 11-6, prepare the employer’s September 30 journal entries
to record (1) salary expense and its related payroll liabilities for this employee and (2) the employer’s
payroll taxes expense and its related liabilities. The employee’s federal income taxes withheld by the employer are $135 for this pay period.
Tax Rate Applied To
FICA—Social Security . . . . . . . 6.20% First $87,000
FICA—Medicare . . . . . . . . . . . 1.45 All gross pay
FUTA . . . . . . . . . . . . . . . . . . . 0.80 First $7,000
SUTA . . . . . . . . . . . . . . . . . . . 2.90 First $7,000
Gross Pay Gross
through Pay for
August September
a. $ 6,400 $ 800
b. 18,200 2,100
c. 82,000 8,000
What obligation does an entrepreneur (owner) have to investors
that purchase bonds to finance the business
To prepare the employer's September 30 journal entries for salary expense and its related payroll liabilities and the employer's payroll taxes expense and its related liabilities, we need to calculate the various components based on the given data and tax rates. Let's calculate each part one by one.
1. Salary Expense and Payroll Liabilities:
a. For employee a:
- Salary expense: $800
- Social Security tax: 6.20% of first $87,000 = 6.20% * $800 = $49.60
- Medicare tax: 1.45% of gross pay = 1.45% * $800 = $11.60
- Federal income tax withheld: $135
Journal entry:
Debit Salary Expense: $800
Credit Employee Income Taxes Payable: $135
Credit Social Security Taxes Payable: $49.60
Credit Medicare Taxes Payable: $11.60
b. For employee b:
- Salary expense: $2,100
- Social Security tax: 6.20% of first $87,000 = 6.20% * $2,100 = $130.20
- Medicare tax: 1.45% of gross pay = 1.45% * $2,100 = $30.45
- Federal income tax withheld: $135
Journal entry:
Debit Salary Expense: $2,100
Credit Employee Income Taxes Payable: $135
Credit Social Security Taxes Payable: $130.20
Credit Medicare Taxes Payable: $30.45
c. For employee c:
- Salary expense: $8,000
- Social Security tax: 6.20% of first $87,000 = 6.20% * $8,000 = $496.00
- Medicare tax: 1.45% of gross pay = 1.45% * $8,000 = $116.00
- Federal income tax withheld: $135
Journal entry:
Debit Salary Expense: $8,000
Credit Employee Income Taxes Payable: $135
Credit Social Security Taxes Payable: $496.00
Credit Medicare Taxes Payable: $116.00
2. Payroll Taxes Expense and Liabilities:
- FUTA tax: 0.80% of first $7,000 (applied to all employees)
- SUTA tax: 2.90% of first $7,000 (applied to all employees)
- FUTA tax for all employees:
- 0.80% of $6,400 + 0.80% of $18,200 + 0.80% of $82,000 = $51.20 + $145.60 + $656.00 = $852.80
- SUTA tax for all employees:
- 2.90% of $6,400 + 2.90% of $18,200 + 2.90% of $82,000 = $185.60 + $528.20 + $2,378.00 = $3,091.80
Journal entry:
Debit Payroll Taxes Expense: $852.80 (FUTA taxes)
Credit FUTA Taxes Payable: $852.80
Debit Payroll Taxes Expense: $3,091.80 (SUTA taxes)
Credit SUTA Taxes Payable: $3,091.80
These journal entries record the salary expense and its related payroll liabilities, as well as the employer's payroll taxes expense and its related liabilities for the given employees and tax rates.