Sample Problem

Chapter 11

Computing and recording employer’s payroll tax expense. The payroll register of Clifton’s Automotive and Detail Repair Shop showed total employee earnings of $2,890 for the week ended April 8, 2007.INSTRUCTIONS1.Compute the employer’s payroll taxes for the period. The tax rates are as follows:                                                                                                       

2.Prepare a general journal entry to record the employer’s payroll taxes for the period.Analyze: If the FUTA tax rate had been 1.2 percent, what total employer payroll taxes would have been recorded?

Computing employer’s payroll tax expense

1. Compute the employer’s payroll taxes for the period. The tax rates are as follows:

Social security 6.2% x $2,890 = 179.18Medicare 1.45% x $2,890 = 41.91FUTA 0.8% x $2,890 = 23.12SUTA 2.2 % x $2,890 = 63.58

Recording employer’s payroll tax expense

The general journal entry would be:

Payroll tax expense 307.79Social security tax payable 179.18Medicare tax payable 41.91Federal Unemployment tax payable 23.12State Unemployment tax payable 63.58

Analyze

If the FUTA tax rate had been 1.2%, the total employers payroll taxes would have been $319.35.

$2,890 x 1.2% = 34.68 34.68+179.18+41.91+63.58=319.35