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Journal Entries for payroll and related taxes

I5-1:

The following information is available concerning The Blue Collar Company's payroll for November, 2009:

Employee Date
of Hire October
Year to
Date Earnings November Earnings Federal Income Tax Withheld State Income Tax Withheld

Z. Allen 1/6/2002 $104,000 $10,600 $3,200 $250
G. Burns 9/1/2009 6,000 3,000 600 45
C. Gunn 5/1/2001 100,000 10,000 3,000 225
B. Stark 11/1/2001 0 3,500 700 55
K. Veil 3/1/2003 110,000 11,000 3,500 265

Blue Collar pays wages monthly.

The O.A.S.D.I. rate is 6.2% on the first $106,800 of earnings.

The Hospital Insurance tax is 1.45%.

The federal unemployment tax is 6.2% on the first $7,000 of earnings.

The state unemployment tax is 5.5% on the first $7,000 of earnings. However, because of Blue Collar's excellent merit rating, the rate has been reduced to 2.5%. Employees do not pay state unemployment taxes.

Instructions:

1) Prepare the journal entries necessary to record the November payroll and all taxes.

Solution Preview

The O.A.S.D.I. Tax for each person would be based on when the earnings reach $106,800.
Z. Allen - Earnings already $104,000 and so only balance $2,800 would be subject to tax = 2,800 X 6.2 % = 173.6
G. Burns = 3,000 X 6.2% = 186
C. Gunn - Earnings already $100,000 and tax would be on remaining 6,800 = 6,800 X 6.2% = 421.60
B. Stark = 3,500 X 6.2% = 217
K. Veil - earnings already over 106,800 and so no ...

Solution Summary

The solution explains the Journal Entries for payroll and related taxes

$2.19