On October 1, Lolita M. Lovely established a Hair Salon which she named Lolita's Lovely Locks. Her business is organized as a corporation. The business provides hair cuts, hair styling, and hair grooming for both men and woman.

Company      8500 Dodge St.

Address:        Omaha, NE 68105

 

Including herself, Lolita has three paid employees. Lolita pays herself a salary. Her two employees are paid hourly. The employee earnings records have the payment details including pay rates, withholding allowances, pay flex deductions, identification information, etc.

Tax Information  Federal Tax id: : 47-3882497

All taxes and withholding amounts are based on earnings after deduction of the Pay flex amount.

OASDI (Social Security) tax rate 6.2% (no employee will go over the maximum in this assignment).

Medicare (HI or Health Insurance) tax rate 1.45%

Nebraska Unemployment tax rate 2.4% on the first $9,000 of earnings.

Federal Unemployment tax rate 0.6% (= .006) on the first $7,000 of earnings

Transactions and Requirements

1. Complete the Earnings Records and Payroll Registers   Calculate the earnings, deductions and net pay for each employee. Use the income tax withholding tables included with your text. Use the wage bracket (table method) to compute income tax withholding. Calculate and enter the deduction for State withholding assuming that the State income tax withholding is equal to 15% of the Federal income tax withholding. The Social Security (OASDI) tax rate is 6.2% of taxable wages (none of the employees will have earnings in excess of the social security base. The Medicare (HI) tax rate is 1.45%.

 

October Salary & Wage Information

Employees Paid Hourly         Regular           Overtime

                                               Hours             Hours

Linda A. Osborne                  168                 12

Kathryn B. Jones                   168                  2

 

Salaries Employee:   Lolita M. Lovely                      $3,500 per Month

 

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November  Salary & Wage Information

 

Employees Paid Hourly         Regular           Overtime

                                               Hours             Hours

Linda A. Osborne                  176                 22

Kathryn B. Jones                   168                  0

 

Salaries Employee

Lolita M. Lovely                    $3,500 per Month

 

December  Salary & Wage Information

 

Employees Paid Hourly         Regular           Overtime

                                               Hours             Hours

Linda A. Osborne                  168                 12

Kathryn B. Jones                   130                  4

 

Salaries Employee

Lolita M. Lovely                    $3,500 per Month

1. 
   
2. Prepare and post Journal entries.  For the transactions listed below, prepare appropriate journal entries and post the entries to the appropriate general ledger accounts.

October

Oct  31          Journalize and post the entry to record the October payroll. Your entry should include: Salaries & Wages expense, all of the related deductions, and a credit to cash for the net pay.

Oct  31          Journalize and post the entry to record the employer's payroll tax expense for the month of October. Your entry should include payroll tax expense and separately identified amounts for each payroll tax liability item.

November 

Nov  10         Journalize and post the entry to record the payment (deposit) of the Federal income tax, Social Security tax, and Medicare tax.   Your entry should include both the employee and employer's share of Social Security taxes and Medicare taxes.

Nov  30         Journalize and post the entry to record the November payroll. Your entry should include: Salaries & Wages expense, all of the related deductions, and a credit to cash for the net pay.

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Nov  30         Journalize and post the entry to record the employer's payroll tax expense for the month of November. Your entry should include payroll tax expense and separately identified amounts for each payroll tax liability item.

December 

Dec  10          Journalize and post the entry to record the payment (deposit) of the Federal income tax, Social Security tax, and Medicare tax. Your entry should include both the employee and employer's share of Social Security taxes and Medicare taxes.

Dec  30          Journalize and post the entry to record the December payroll. Your entry should include: Salaries & Wages expense, all of the related deductions, and a credit to cash for the net pay.

Dec  30          Journalize and post the entry to record the employer's payroll tax expense for the month of December. Your entry should include payroll tax expense and separately identified amounts for each payroll tax liability item.

3.  Prepare Payroll Tax Reports  Prepare the quarterly and annual payroll tax reports indicated below. The source of the information for these reports is the employee earnings records, the journal entries, and the general ledger accounts. Some of the identifying information has been entered on the form. However, carefully review each form and make sure all necessary identifying information is entered on all forms.

(1)                    Prepare the Federal form 941: Employer's quarterly federal return for the quarter ended December 31. Even though the year is 2017, you will use  2016 Forms. You should assume that the December taxes will be deposited on January 10 of the following year. Therefore, the total tax liabilities and the total deposits should be the same amount. Be sure to fill in all information and answer all applicable questions.

(2)         Prepare the Employer's quarterly Nebraska unemployment tax return for the quarter ended December 31. Also prepare the Nebraska wage report.

(3)        Prepare the Federal form 940 Federal unemployment tax return for the 

year ended December 31.  Even though the year is 2017, you will use  2016 Forms.  There are no adjustments required on lines 9 , 10 or 11 of the form 940. Be sure you complete all required information including identifying information and applicable questions. The unemployment taxes will be deposited on January 20.

(4)         Prepare one copy of the W-2 form for each employee for the year ended December 31. Be sure to fill in all appropriate amount boxes and identification boxes. None of the employees are covered by a retirement plan. None of the employees are deceased. None of the employees are statutory employees. For the W-2 forms, the Federal ID number is: 47-3882497. For the W-2 forms, the Nebraska State ID number is 123456.