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    Computing and Journalizing Payroll Transactions

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    Benny Hill had earned (accumulated) salary of $96,000 through November 30. Her December salary amounted to $9,000. Pam Lane began employment on December 1 and will be paid her first month's salary of $3,500 on December 31. Income tax withholding for December for each employee is as follows:

    Kim Benny Pam Lane
    Federal Income Tax $2,200 $700
    State Income Tax 250 175

    The following payroll tax rates are applicable:

    FICA tax on first $100,000 8 %
    FUTA tax on first $7,000 0.8 %
    SUTA tax on first $7,000 5.4 %

    Record the payroll for the two employees at December 31 and record the employer's share of payroll tax expense for the December 31 payroll. Two journal entries required.

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    Solution Summary

    This solution illustrates how to compute the employee's and employer's payroll tax liabilities and the employee's net pay. It then illustrates how to journalize these transactions.