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Allison Hardware Company's payroll for November 2010 is summarized below.
Amount Subject to Payroll Taxes
Payroll Wages Due F.I.C.A Federal State
Factory $140,000 $140,000 $40,000 $40,000
Sales 32,000 32,000 4,000 4,000
Administrative 36,000 36,000 ----- -----
Total $208,000 $208,000 $44,000 $44,000
At this point in the year some emplyees have already received wages in excess of those to which payroll
taxes apply. Assume that the state unemployment tax is 2.5%. The F.I.C.A. rate is 7.65% on an employee's
wages to $102,000 and 1.45% in excess of $102,000. Of the $208,000 wages subject to F.I.C.A. tax, $20,000
of the sales wages is in excess of $102,000. Federal unemployment tax rate is 0.8% after credits. Income
tax withheld amounts to $16,000 for factory, $7,000 for sales, and $6,000 for administrative.
a. Prepare a schedule showing the employer's total cost of wages for November by function.
b. Prepare the journal entries to record the factory, sales, and administrative payrolls including the employer's payroll taxes.
The solution explains how to calculate the record payroll tax entries