Question

Question: Recording employee and employer payroll taxes County Company had the following partially completed payroll register:

Earnings			Withholdings
Beginning Cumulative Earnings	Current Period Earnings	Ending Cumulative Earnings	OASDI	Medicare	Income tax	Health Insurance	United way	Total Withholding	Net pay	Check No.	Salaries and Wages Expense
\( 77,000	\) 4,500				\( 900	\) 90	\(15			801
112,000	7,200				1,200	144	35			802
48,000	3,300				600	66	0			803
61,000	3,300				850	66	20			804
0	4,500				1,100	90	0			805
\)298,000	\(22,800				\)4,650	\(456	\)70

Requirements

1. Complete the payroll register. Round to two decimals.
2. Journalize County Company’s salaries and wages expense accrual for the current pay period.
3. Journalize County Company’s expenses for employer payroll taxes for the current pay period.
4. Journalize the payment to employees.
5. Journalize the payment for withholdings and employer payroll taxes.

Short answer

Answer

1. Salaries and wages expense = $22,800
2. Salaries and wages payable = $15,923
3. Payroll tax expense =$1,970
4. Salaries and wages payable = $15,923.2
5. FICA-OASDI taxes payable = $2740

Step-by-step solution

Meaning of Payroll

Payroll isthe emolument that a representative gets from his manager for the work he does for the company. It incorporates different remittances and derivations depending on the work of the employee.

(1) Completing payroll register

Earnings			Withholdings
Beginning Cumulative Earnings a	Current Period Earnings b	Ending Cumulative Earnings C=a+b	OASDI d=b 6.2%	Medicare e=b 1.45%	Income Tax f	Health Insurance g	United Way h	Total Withholding I=b+d+e+f+g+h	Net Pay J=b-i	Check No.	Salaries and Wages Expense K=b
$77,000	$4,500	81500	279	65.25	$ 900	$ 90	$15	1349.25	3150.75	801	4500
112,000	7,200	119200	403.0	104.4	1,200	144	35	1886.4	5313.6	802	7200
48,000	3,300	51300	204.6	47.85	600	66	0	918.45	2381.55	803	3300
61,000	3,300	64300	204.6	47.85	850	66	20	1188.45	2111.55	804	3300
0	4,500	4500	279.0	65.25	1,100	90	0	1534.25	2965.75	805	4500
$298,000	$22,800	320800	1370.2	330.6	$4,650	$456	$70	6876.8	15923.2		22800

Working note:

Calculation of OASDI amount $403.0

I assume that this payroll is for the year 2016. The OASDI tax rate for wages paid in 2016 is set at 6.2%, and OASDI taxable wages have a limit of $1,185,000 for 2016, which is exceeded as seen in ending cumulative earnings (119,200).

Therefore, the amount is calculated as:

$$\begin{gathered} \text{OASDI}=\left(\text{OASDI}\text{limit}-\text{Begining}\text{cumulative}\text{earning}\right)\times \text{OASDI}\text{rate} \\ =\left(118,500-112,000\right)\times 6.2\% \\ =6,500\times 6.2\% \\ =403 \end{gathered}$$

(2) Preparing journal entry

Date	Particulars	Debit ($)	Credit ($)
	Salaries and wages expense	22,800
	FICA-OASDI taxes payable		1,370
	FICA-Medicare taxes payable		331
	Employee Income taxes payable		4,650
	Employee Health Insurance payable		456
	United way payable		70
	Salaries and wages payable		15,923

(3) Preparing journal entry

Date	Particulars	Debit ($)	Credit ($)
	Payroll tax expense	1,970
	FICA-OASDI taxes payable		1,370
	FICA-Medicare taxes payable		331
	Federal Unemployment taxes payable		27
	State Unemployment taxes payable		243

Working notes:

Calculate payroll of the current period earnings:

Earnings			Employer Payroll Taxes
Beginning Cumulative Earnings	Current Period Earnings	Ending Cumulative earnings	OASDI	Medicare	FUTA (0.6%)	SUTA (5.4%)	Total Taxes
$77,000	$4,500	$81,500	$279	$65	$0	$0	$344
$112,000	$7200	$119,200	$403	$104	$0	$0	$507
$48,000	$3,300	$51,300	$205	$48	$0	$0	$252
$61,000	$3,300	$64,300	$205	$48	$0	$0	$252
$0	$4,500	$4,500	$279	$65	$27	$243	$614
$298,000	$22,800	$320,800	$1,370	$331	$27	$243	$1,971

(4) Preparing journal entry

Date	Particulars	Debit ($)	Credit ($)
	Salaries and wages payable	15,923.2
	Cash		15923.2