Question
When employers pay employees, they are required to withhold the employee's taxes. The rates and limits for these taxes change with new laws. For this
When employers pay employees, they are required to withhold the employee's taxes. The rates and limits for these taxes change with new laws. For this problem, assume the withholding amounts include the following:
withholding for the old age portion of FICA taxes = 6.2%, up until the employee reaches $110,100 of compensation for the calendar year. After that the rate goes to zero.
withholding for the medicare portion of FICA taxes = 1.45% of all compensation
federal income taxes = 10% of compensation (in reality this amount will vary by person depending the W-4 exemptions they claim and the tax bracket for the wage)
state income taxes = 0% for this problem
At the point of withholding, the amount is a trust fund liability to the federal and state governments.
Employer taxes
In addition, employers also pay taxes on compensation. Employers (at this time) owe the same amount as employees for both kinds of FICA taxes. The limits are also the same.
Further, employers pay taxes for unemployment compensation at the state and federa level. For this problem, assume the following :
State unemployment compensation taxes = 1% on the first $7,000 of wages for the calendar year
Federal unemployment compensation taxes = .8% on the first $7,000 of wages for the calendar year
Please compute the employee and employer payroll taxes for Otis Company. Record the payroll expense for September. Record the payroll tax liabilities for September. Then record the payment of those taxes at the end of the month. Use Excel forumlas to help you compute amount.
| Otis Company Detail Records of Compensation for August and September | ||||||||||
| Name | Earnings from Jan 1 to Aug 31 | September Earnings | Federal Income Tax Withholding | FICA (old age) | FICA (medicare) | State U.C. | Federal U.C. | |||
| B.D. Williams | $6,800 | $800 | ||||||||
| D. Raye | $6,500 | $700 | ||||||||
| K. Baker | $7,600 | $1,100 | ||||||||
| F. Lopez | $13,600 | $1,900 | ||||||||
| A. Daniels | $107,000 | $13,000 | ||||||||
| B. Kingston | $112,000 | $16,000 | ||||||||
| Instructions: | ||||||||||
| (a) Complete the payroll sheet and make the necessary entry to record the payment of the payroll. | ||||||||||
| Account Title | DR Amount | CR Amount | ||||||||
| (b) Make the entry to record the payroll tax expenses of Otis Import Company. | ||||||||||
| Account Title | DR Amount | CR Amount | ||||||||
| (c) Make the entry to record the payment of the payroll liabilities created. Assume that the company pays all payroll liabilities at the end of each month. | ||||||||||
| 31-Dec | Account Title | DR Amount | CR Amount | |||||||
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Fraud Smart
Authors: K. H. Spencer Pickett
1st Edition
0470682582, 978-0470682586
