Lee Werner is general manager of United Tanning Salons. During 2010, Werner worked for the company all year at a \($6,300\) monthly salary. He also earned a year- end bonus equal to 10% of his salary.
Werner’s federal income tax withheld during 2010 was \($840\) per month, plus \($925\) on his bonus check. State income tax withheld came to \($90\) per month, plus \($50\) on the bonus. The FICA tax withheld was 8% of the first \($90,000\) in annual earnings. Werner authorized the following payroll deductions: United Fund contribution of 1% of total earnings, and life insurance of \($30\) per month.
United incurred payroll tax expense on Werner for FICA tax of 8 /o of the first \($90,000\) 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, United provides Werner with health insurance at a cost of \($150\) per month. During 2010, United paid \($5,000\) into Werner’s retirement plan.
Requirements
1. Compute Werner’s gross pay, payroll deductions, and net pay for the full year 2010. Round all amounts to the nearest dollar.
2. Compute United’s total 2010 payroll expense for Werner.
3. Make the journal entry to record United’s expense for Werner’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.