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Determining and Journalizing Payroll Taxes and Net Payroll

(Payroll Tax Entries) Below is a payroll sheet for Jedi Import Company for the month of September 2007. The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is $7,000. Assume a 10% federal income tax rate for all employees and a 7.65% F.I.C.A. tax on employee and employer on a maximum of $90,000. In addition, 1.45% is charged both employer and employee for an employee's wage in excess of $90,000 per employee.

Name Earnings to Aug. 31 September Earnings Income Tax Withholding F.I.C.A. State U.C. Federal U.C.
B.D. Williams
$ 6,800
$ 800

D. Prowse
6,300
700

K. Baker
7,600
1,100

F. Oz
13,600
1,900

A. Daniels
105,000
15,000

B. Mayhew
112,000
16,000

Instructions

Complete the payroll sheet and make the necessary entry to record the payment of the payroll.
Make the entry to record the payroll tax expenses of Jedi Import Company.
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.

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Solution Summary

This solution demonstrates how to compute net payroll and payroll tax expense, and how to journalize these results.

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