Chapter 9, Problem 17E

a.

To determine

To prepare: Payroll register.

Explanation of Solution

Given,
Wage rate is $10/hour.
Overtime rate is $15/hour.
Normal working hours are 40 hours.
FICA Social security tax is 6.2% of first $118,500.
FICA Medicare tax is 1.45% of gross pay.
FUTA is 0.6% of first $7000
SUTA is 5.4% of first $7000.

Payroll register

Table (1)

Working notes:

Calculation of FUTA of A,

$\begin{array}{c}\text{FUTA}\text{of}\text{A}=0.6\%\text{of}\text{first}\$7,000\\ =0.6\%\times \$200\\ =\$1.2\end{array}$

Calculation of FUTA of Z,

$\begin{array}{c}\text{FUTA}\text{of}\text{Z}=0.6\%\text{of}\text{first}\$7,000\\ =0.6\%\times \$500\\ =\$3\end{array}$

Calculation of FUTA of G,

$\begin{array}{c}\text{FUTA}\text{of}\text{G}=0.6\%\text{of}\text{first}\$7,000\\ =0.6\%\times \$2000\\ =\$12\end{array}$

Calculation of SUTA of A,

$\begin{array}{c}\text{SUTA}\text{of}\text{A}=5.4\%\text{of}\text{first}\$7,000\\ =5.4\%\times \$200\\ =\$10.8\end{array}$

Calculation of SUTA of Z,

$\begin{array}{c}\text{SUTA}\text{of}\text{Z}=5.4\%\text{of}\text{first}\$7,000\\ =5.4\%\times \$500\\ =\$27\end{array}$

Calculation of SUTA of G,

$\begin{array}{c}\text{SUTA}\text{of}\text{G}=5.4\%\text{of}\text{first}\$7,000\\ =5.4\%\times \$2000\\ =\$108\end{array}$

Calculation of security tax of K,

$\begin{array}{c}\text{Social}\text{Security}\text{Tax}\text{of}\text{K}=6.2\%\text{of}\text{first}\$118,500\\ =6.2\%\times \$1800\\ =\$111.6\end{array}$

Calculation of security tax of A,

$\begin{array}{c}\text{Social}\text{Security}\text{Tax}\text{of}\text{A}=6.2\%\text{of}\text{first}\$118,500\\ =6.2\%\times \$500\\ =\$31\end{array}$

Calculation of security tax of N,

$\begin{array}{c}\text{Social}\text{Security}\text{Tax}\text{of}\text{N}=6.2\%\text{of}\text{first}\$118,500\\ =6.2\%\times \$920\\ =\$57.04\end{array}$

Calculation of security tax of Z,

$\begin{array}{c}\text{Social}\text{Security}\text{Tax}\text{of}\text{Z}=6.2\%\text{of}\text{first}\$118,500\\ =6.2\%\times \$860\\ =\$53.40\end{array}$

Calculation of security tax of G,

$\begin{array}{c}\text{Social}\text{Security}\text{Tax}\text{of}\text{G}=6.2\%\text{of}\text{first}\$118,500\\ =6.2\%\times \$740\\ =\$46\end{array}$

Calculation of Medicare tax of K,

$\begin{array}{c}\text{Medicare}\text{Tax}\text{of}\text{K}=1.45\%\text{of}\text{gross}\text{pay}\\ =1.45\%\times \$7,000\\ =\$101.5\end{array}$

Calculation of Medicare tax of A,

$\begin{array}{c}\text{Medicare}\text{Tax}\text{of}\text{A}=1.45\%\text{of}\text{gross}\text{pay}\\ =1.45\%\times \$500\\ =\$7.25\end{array}$

Calculation of Medicare tax of N,

$\begin{array}{c}\text{Medicare}\text{Tax}\text{of}\text{N}=1.45\%\text{of}\text{gross}\text{pay}\\ =1.45\%\times \$920\\ =\$13.34\end{array}$

Calculation of Medicare tax of Z,

$\begin{array}{c}\text{Medicare}\text{Tax}\text{of}\text{Z}=1.45\%\text{of}\text{gross}\text{pay}\\ =1.45\%\times \$860\\ =\$12.47\end{array}$

Calculation of Medicare tax of G,

$\begin{array}{c}\text{Medicare}\text{Tax}\text{of}\text{G}=1.45\%\text{of}\text{gross}\text{pay}\\ =1.45\%\times \$740\\ =\$10.73\end{array}$

Calculation of employee benefit of K,

$\begin{array}{c}\text{Employee}\text{benefit}\text{of}\text{K}=5\%\times \text{Gross}\text{Pay}\\ =5\%\times \$7,000\\ =\$350\end{array}$

Calculation of employee benefit of A,

$\begin{array}{c}\text{Employee}\text{benefit}\text{of}\text{A}=5\%\times \text{Gross}\text{Pay}\\ =5\%\times \$500\\ =\$25\end{array}$

Calculation of employee benefit of N

$\begin{array}{c}\text{Employee}\text{benefit}\text{of}\text{N}=5\%\times \text{Gross}\text{Pay}\\ =5\%\times \$920\\ =\$46\end{array}$

Calculation of employee benefit of Z,

$\begin{array}{c}\text{Employee}\text{benefit}\text{of}\text{Z}=5\%\times \text{Gross}\text{Pay}\\ =5\%\times \$860\\ =\$43\end{array}$

Calculation of employee benefit of G,

$\begin{array}{c}\text{Employee}\text{benefit}\text{of}\text{G}=5\%\times \text{Gross}\text{Pay}\\ =5\%\times \$740\\ =\$37\end{array}$

Calculation of net pay of K,

$\begin{array}{c}\text{Net}\text{Pay}\text{of}\text{K}=\left[\begin{array}{l}\text{Gross}\text{Pay}-\text{FIT}-\text{SIT}-\text{Social}\text{security}\text{tax}\\ -\text{Medicare}\text{tax}-\text{Benefit}\text{of}\text{employee}\end{array}\right]\\ =\$7000-\$2000-\$300-\$111.6-\$101.5-\$350\\ =\$4136.9\end{array}$

Calculation of net pay of A,

$\begin{array}{c}\text{Net}\text{Pay}\text{of}\text{A}=\left[\begin{array}{l}\text{Gross}\text{Pay}-\text{FIT}-\text{SIT}-\text{Social}\text{security}\text{tax}\\ -\text{Medicare}\text{tax}-\text{Benefit}\text{of}\text{employee}\end{array}\right]\\ =\$500-\$80-\$20-\$31-\$7.25-\$25\\ =\$336.75\end{array}$

Calculation of net pay of N,

$\begin{array}{c}\text{Net}\text{Pay}\text{of}\text{N}=\left[\begin{array}{l}\text{Gross}\text{Pay}-\text{FIT}-\text{SIT}-\text{Social}\text{security}\text{tax}\\ -\text{Medicare}\text{tax}-\text{Benefit}\text{of}\text{employee}\end{array}\right]\\ =\$920-\$110-\$25-\$57.04-\$13.34-\$46\\ =\$668.62\end{array}$

Calculation of net pay of Z,

$\begin{array}{c}\text{Net}\text{Pay}\text{of}\text{Z}=\left[\begin{array}{l}\text{Gross}\text{Pay}-\text{FIT}-\text{SIT}-\text{Social}\text{security}\text{tax}\\ -\text{Medicare}\text{tax}-\text{Benefit}\text{of}\text{employee}\end{array}\right]\\ =\$860-\$100-\$22-\$53.40-\$13.34-\$92\\ =\$579.26\end{array}$

Calculation of net pay of G,

$\begin{array}{c}\text{Net}\text{Pay}\text{of}\text{G}=\left[\begin{array}{l}\text{Gross}\text{Pay}-\text{FIT}-\text{SIT}-\text{Social}\text{security}\text{tax}\\ -\text{Medicare}\text{tax}-\text{Benefit}\text{of}\text{employee}\end{array}\right]\\ =\$740-\$90-\$21-\$46-\$10.73-\$37\\ =\$535.27\end{array}$

(b)

To determine

To prepare: Journal Entry for accrued biweekly payroll.

Explanation of Solution

Journal Entry for accrued biweekly payroll

Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)
August 31	Salaries Expense		10,020
	FICA- Social security taxes payable			299.04
	FICA Medicare taxes payable			145.29
	Employee federal taxes payable			2,380
	Employee state taxes payable			388
	Employee benefits plan payable			501
	Salaries Payable			6306.67
	(To record payroll for August)
Table (2)

• Salaries expense is an expense account for company. Since the balance of this account is increased it is debited.
• FICA Social security taxes payable is a liability to company. Its balance is increasing, so it is credited.
• FICA Medicare taxes payable is a liability to company. Its balance is increasing, so it is credited.
• Employee federal taxes payable is a liability to company. Its balance is increasing, so it is credited.
• Employee state taxes payable is a liability to company. Its balance is increasing, so it is credited.
• Salaries payable is a liability to company. Its balance is increasing, so it is credited.

(c)

To determine

To prepare: Journal Entry to record employer’s cash payment of the net payroll

Explanation of Solution

Journal Entry to record employer’s cash payment of the net payroll

Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)
August 31	Salaries Payable		6306.67
	Cash			6306.67
	(To record payment for August)
Table (3)

• Salaries Payable is a liability to company. Its balance is decreasing, so it is debited.
• Cash is an asset account. Since company is paying salaries, cash is reducing. Hence cash is credited.

(d)

To determine

To prepare: Journal Entry to record employer’s payroll taxes

Explanation of Solution

Journal Entry to record employer’s payroll taxes

Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)
August 31	Payroll Taxes expense		3212.33
	Employee benefit plan expenses		1,002
	Employee benefit plan payable			1,002
	FICA- Social security taxes payable			299.04
	FICA Medicare taxes payable			145.29
	Employee federal taxes payable			2,380
	Employee state taxes payable			388
	(To record employer’s payroll taxes)
Table (4)

• Payroll taxes are an expense account for company. Since the balance of this account is increased it is debited.
• Employee benefit plan expenses is an expense account for company. Since the balance of this account is increased it is debited.
• Employee benefit plan payable is a liability to company. Its balance is increasing, so it is credited.
• FICA social security taxes payable is a liability to company. Its balance is increasing, so it is credited.
• FICA Medicare taxes payable is a liability to company. Its balance is increasing, so it is credited.
• Employee federal taxes payable is a liability to company. Its balance is increasing, so it is credited.
• Employee state taxes payable is a liability to company. Its balance is increasing, so it is credited.

(e)

To determine

To prepare: Journal Entry to pay all liabilities.

Explanation of Solution

Journal Entry to pay all liabilities

Date	Account Title and Explanation	Post ref	Debit ($)	Credit ($)
August 31	FICA- Social security taxes payable		598.08
	FICA Medicare taxes payable		290.58
	Employee federal taxes payable		2,380
	Employee state taxes payable		388
	Employee benefits plan payable		1,503
	FUTA payable		16.2
	SUTA payable		145.8
	Cash			5321.66
	(To record payment of all liabilities)
Table (5)

• FICA Social security taxes payable is a liability to company Its balance is increasing, so it is credited.
• FICA Medicare taxes payable is a liability to company. Its balance is increasing, so it is credited.
• Employee federal taxes payable is a liability to company. Its balance is increasing, so it is credited.
• Employee state taxes payable is a liability to company. Its balance is increasing, so it is credited.
• Employee benefit plan payable is a liability to company. Its balance is increasing, so it is credited.
• FUTA payable is a liability to company. Its balance is increasing, so it is credited.
• SUTA payable is a liability to company. Its balance is increasing, so it is credited.
• Cash is an asset account. Since company is paying salaries, cash is reducing. Hence cash is credited.