Calculation of Taxable Earnings and Employer Payroll Taxes Assignment Paper
Question
Selected information from the payroll register of Joanie’s Boutique for the week ended September 14, 20–, as is follows: Social Security tax is 6.2% on the first $128,400 of earnings for each employee. Medicare tax is 1.45% of gross earnings. FUTA tax is 0.6% and SUTA tax is 5.4% on the first $7,000 of earnings. Calculation of Taxable Earnings and Employer Payroll Taxes Assignment Paper
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Step-by-step
To calculate the taxable earnings and employer payroll taxes for Joanie’s Boutique, we need to use the following information from the payroll register: Employee A: Gross earnings of $3,200 Employee B: Gross earnings of $4,500 Employee C: Gross earnings of $6,800 Employee D: Gross earnings of $9,000 Calculation of Taxable Earnings and Employer Payroll Taxes Assignment Paper
- Explanation for step 1
Calculation of Social Security and Medicare taxes: For Social Security tax, we will multiply each employee’s gross earnings by 6.2% (up to $128,400) to find the amount of Social Security tax to be withheld. For Medicare tax, we will multiply each employee’s gross earnings by 1.45% to find the amount of Medicare tax to be withheld.
The calculations for each employee are as follows: Employee A: Social Security tax: $198.40 (6.2% of $3,200) Medicare tax: $46.40 (1.45% of $3,200) Employee B: Social Security tax: $198.40 (6.2% of $3,200) Medicare tax: $65.25 (1.45% of $4,500) Employee C: Social Security tax: $419.68 (6.2% of $6,800) Medicare tax: $98.60 (1.45% of $6,800)
Employee D: Social Security tax: $558.00 (6.2% of $9,000) Medicare tax: $130.50 (1.45% of $9,000)
- Explanation for step 2
Calculation of FUTA and SUTA taxes: For FUTA tax, we will multiply each employee’s gross earnings by 0.6% (up to $7,000) to find the amount of FUTA tax to be paid. For SUTA tax, we will multiply each employee’s gross earnings by 5.4% (up to $7,000) to find the amount of SUTA tax to be paid.
The calculations for each employee are as follows: Employee A: FUTA tax: $0.00 (0.6% of $3,200 is less than $7,000) SUTA tax: $174.72 (5.4% of $3,200) Employee B: FUTA tax: $42.00 (0.6% of $7,000) SUTA tax: $243.00 (5.4% of $4,500) Employee C: FUTA tax: $42.00 (0.6% of $7,000) SUTA tax: $367.20 (5.4% of $6,800) Employee D: FUTA tax: $42.00 (0.6% of $7,000) SUTA tax: $378.00 (5.4% of $7,000)
Preparation of journal entry: The journal entry to record the employer payroll taxes would be as follows: Debit: Salaries and Wages Expense: $24,200 (total gross earnings for all employees) Social Security Tax Payable: $1,374.48 (total Social Security tax) Medicare Tax Payable: $340.75 (total Medicare tax) FUTA Tax Payable: $126.00 (total FUTA tax) SUTA Tax Payable: $1,162.92 (total SUTA tax) Calculation of Taxable Earnings and Employer Payroll Taxes Assignment Paper
Final answer
Credit: Cash: $22,196.35 (total net pay for all employees) Note that the debit to Salaries and Wages Expense includes both the gross earnings.
Calculation of Taxable Earnings and Employer Payroll Taxes Assignment Paper