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.
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.