4277-6-8PPA

AID: 1825 | 29/03/2013

(a) The employees of Company P earn wages of $12,000 for the two weeks ending April
15.

The amount Withheld for Federal Income Tax = $260.00

The total taxable payroll for FICA (Federal Insurance Contribution Act) HI
(Hospital Insurance)
= $12,000.00

The total taxable payroll for FICA (Federal Insurance Contribution Act) OASDI
(Old age, Survivors, and Disability Insurance program)
= $12,000.00

The total taxable payroll for FUTA (Federal Unemployment Tax Act) and SUTA
(State Unemployment Tax Act) = $9,800.00

The state contribution rate for the company is 2.9%

All the employees are subject to state unemployment contribution of 0.5%

Compute the amount of all deductions from employees payroll, and the amount of
net cash payment to the employees as follows:

Compute FICA tax(OASDI) as follows:

Taxable wages for OASDI
OASDI rate

= $1,200.00
= 6.2%

OASDI Tax Taxable wages OASDI rate

$12,000.00

6.2
100

$744.00

(1)

Compute FICA tax (HI) as follows:

Taxable wages for HI
OASDI rate

= $12,000.00
= 1.45%

HI Tax Taxable wages HI rate

$12,000.00

1.45
100

$174.00

(2)

The amount of Federal Income Tax = $260.00

Compute the amount of employee contribution to state unemployment

contribution (SUTA) as follows:
Taxable wages for SUTA
Contribution rate

(3)

= $9,800.00
= 0.5%

Employees SUTA Tax Taxable wages SUTA rate

$9,800.00

0.5
100

$49.00

(3)

Compute the net cash (wages) paid to the employee as follows:

Net Cash Wages paid Gross wages

FICA-OASDI 1 FICA-HI 2


FIT 3 Employees SUTA
$744.00 $174.00

$260.00 49.00

$12,000.00

$12,000.00 $1,227
$10,773.00

(5)

Record the journal entry in the book of Company P on September 15 for payment of
wages and payroll taxes as follows:

Description

Post. Ref.

Journal
Date

1 April 15 Payment of Wages

Debit
($)

Credit
($)

1 2 0 0 0 00

FICA Taxes Payable

-OASDI
FICA Taxes Payable
-HI
Employees FIT
Payable
Employees SUTA
tax payable
Cash
(To record the
payment of wages and
the liability for the
employees' taxes
withheld.)

7 4 4 00

1 7 4 00

2 6 0 00

4 9 00

1 0 7 7 3 00

Wages is an expense and increased by $12,000.00. Therefore, debit wages with

$12,000.00

FICA Taxes Payable - OASDI is a liability an increased by $744.00.Therefore,

credit FICA Taxes Payable - OASDI with $744.00

FICA Taxes Payable - HI is a liability and increased by $174.00Therefore, credit

FICA Taxes Payable - HI with $174.00.

Employees FIT Payable is a liability and increased by $260.00. Therefore, credit

Employees FIT Payable with $260.00.

Employees SUTA Payable is a liability and increased by $49.00. Therefore, credit

Employees SUTA Payable with $49.00.

Cash is an asset and decreased by $10,773.00 Therefore, credit cash with

$10,773.00.

Compute the amount of payroll taxes as follows:

Total Payroll taxes FICA-OASDI FICA-HI SUTA FUTA

Compute the amount of SUTA tax as follows:
Compute the contribution of employer to state unemployment fund:
Taxable salary for SUTA
SUTA tax rate

= $9,800
= 2.9%

SUTA Tax Taxable wages SUTA TAX rate

$9,800.00

2.9
100

$284.20
Compute the contribution of employees to state unemployment fund:
Taxable salary for SUTA
SUTA tax rate

= $9,800
= 0.5%

SUTA Tax Taxable wages SUTA TAX rate

$9,800.00

0.5
100

$49.00
So, the total amount of SUTA tax Emploer's contribution
Employees contribution
$284.20 $49.00
333.20

(6)

Compute the amount of net FUTA tax as follows:

Taxable salary for FUTA
FUTA tax rate

= $9,800
= 0.8%

Net FUTA Tax Taxable wages FUTA TAX rate

$9,800.00
$784.00

0.8
100

(7)

So, the total Payroll taxes FICA-OASDI FICA-HI SUTA FUTA

$744.00 $174.00 $333.20 $784.00
$2,035.20

(8)

Journal
Date

Description

1 April 15 Payroll Taxes

FICA Taxes Payable
-OASDII
FICA Taxes Payable
-HI
SUTA taxes payable
FUTA taxes payable
(To record the payroll
taxes and liabilities of
the employer )

Post. Ref.

Record the journal entry in the book of Company P on April 15 for the payroll taxes as
follows:

Debit
($)

Credit
($)

2 0 3 5 00

8
7 4 4 00

1 7 4 00

3 3 3 20
7 8 4 00

6
7

Payroll taxes are expenses and increased by $2,035.20. Therefore, debit Payroll
taxes with $2,035.20.

FICA Taxes Payable - OASDI is a liability and increased by $744.00. Therefore,

credit FICA Taxes Payable - OASDI with $744.00

FICA Taxes Payable - HI is a liability an increased by $174.00. Therefore, credit

FICA Taxes Payable - HI with $174.00

SUTA taxes payable are liabilities and increased by $333.20. Therefore, credit
SUTA taxes payable with $333.20

FUTA taxes payable are liabilities and increased by $784.00. Therefore, credit
FUTA taxes payable with $784.00.