Lenny Worthington is general manager of Crossroad Tanning Salons. During 2012, Worthington worked for the company all year at a $6,100 monthly salary. He also earned a year-end bonus equal to 5% of his salary. Worthington’s federal income tax withheld during 2012 was $810 per month, plus $928 on his bonus check. State income tax withheld came to $80 per month, plus $60 on the bonus. The FICA tax withheld was 7.65% of the first $106,800 in annual earnings. Worthington authorized the following payroll deductions: United Fund contribution of 1% of total earnings and life insurance of $15 per month. Crossroad incurred payroll tax expense on Worthington for FICA tax of 7.65% of the first $106,800 in annual earnings. The company also paid state unemployment tax of 5.4% and federal unemployment tax of 0.8% on the first $7,000 in annual earnings. In addition, Crossroad provides Worthington with health insurance at a cost of $110 per month. During 2012, Crossroad paid $7,000 into Worthington’s retirement plan.
Requirements
1. Compute Worthington’s gross pay, payroll deductions, and net pay for the full year 2012. Round all amounts to the nearest dollar.
2. Compute Crossroad’s total 2012 payroll expense for Worthington.
3. Make the journal entry to record Crossroad’s expense for Worthington’s total earnings for the year, his payroll deductions, and net pay. Debit Salary expense and Bonus expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required.