Bailey Dry Cleaners has six employees who were paid the following wages during 2016:

Frank Johnson	$27,000
Bill Long	18,000
Duff Morse	125,000
Laura Stewart	28,000
Cindy Sharpe	26,000
Melissa Ledbetter	20,000
Total	$244,000

The state allows the company a 1% unemployment compensation merit-rating reduction from the normal rate of 5.4%. The federal unemployment rate is 0.6%. The maximum unemployment wages per employee are $7,000 for both the state and the federal government. Income tax withholdings of 20% are applied to all employees. A F.I.C.A. tax rate of 8% on the employee and 8% on the employer is applied to the first $117,000 of each employees wages.

	Required:
1.	Calculate the amount of payroll taxes to be paid by Bailey.
2.	Prepare the journal entries to record the payment of payroll and the payroll tax expense.

CHART OF ACCOUNTS

Bailey Dry Cleaners

General Ledger

	ASSETS
111	Cash
121	Accounts Receivable
141	Inventory
152	Prepaid Insurance
181	Equipment
189	Accumulated Depreciation

	LIABILITIES
211	Accounts Payable
225	Federal Income Taxes Withholding Payable
226	State Income Taxes Withholding Payable
227	Federal Unemployment Taxes Payable
228	State Unemployment Taxes Payable
229	FICA Taxes Payable
231	Salaries Payable
250	Unearned Revenue
261	Income Taxes Payable

	EQUITY
311	Common Stock
331	Retained Earnings

	REVENUE
411	Sales Revenue

	EXPENSES
500	Cost of Goods Sold
511	Insurance Expense
512	Utilities Expense
521	Salaries Expense
522	Payroll Taxes Expense
532	Bad Debt Expense
540	Interest Expense
541	Depreciation Expense
559	Miscellaneous Expenses
910	Income Tax Expense

Prepare the journal entries to record the payment of payroll and the payroll tax expense for 2016. Additional Instructions

PAGE 10

GENERAL JOURNAL

	DATE	ACCOUNT TITLE	POST. REF.	DEBIT	CREDIT
1
2
3
4
5
6
7
8

Calculate the amount of payroll taxes to be paid by Bailey.

Baileys total payroll taxes equal.