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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)

00 0.HI is a liability and increased by $174. credit cash with $10.Record the journal entry in the book of Company P on September 15 for payment of wages and payroll taxes as follows: Description Post.800 = 2.000.5 100  $49.00 So.OASDI is a liability an increased by $744.00  FICA Taxes Payable .00.9% SUTA Tax  Taxable wages  SUTA TAX rate  $9.20 Compute the contribution of employees to state unemployment fund: Taxable salary for SUTA SUTA tax rate = $9.8% Net FUTA Tax  Taxable wages  FUTA TAX rate  $9.20 ……(6) Compute the amount of net FUTA tax as follows: Taxable salary for FUTA FUTA tax rate = $9.00.800 = 0.00 Therefore.Therefore.800 = 0.00.773.8 100 ……(7) . 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.  Employees SUTA Payable is a liability and increased by $49. credit FICA Taxes Payable .00. Therefore.00  2.800.00.00  333.00  0.00  FICA Taxes Payable . debit wages with $12.00Therefore. Journal Date 1 April 15 Payment of Wages Debit ($) 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. Therefore. Ref.9 100  $284.000.HI with $174. Therefore. the total amount of SUTA tax  Emploer's contribution  Employees contribution  $284.00   $784.OASDI with $744.00.800. credit Employees FIT Payable with $260.800.00.  Employees FIT Payable is a liability and increased by $260. credit Employees SUTA Payable with $49.  Cash is an asset and decreased by $10.) 7 4 4 00 1 1 7 4 00 2 2 6 0 00 3 4 9 00 4 1 0 7 7 3 00 5  Wages is an expense and increased by $12.20  $49.00.5% SUTA Tax  Taxable wages  SUTA TAX rate  $9.773. credit FICA Taxes Payable .

.HI with $174. Therefore.00  $2.  FICA Taxes Payable . debit Payroll taxes with $2. the total Payroll taxes  FICA-OASDI  FICA-HI  SUTA  FUTA  $744.035.035. credit FICA Taxes Payable .00.00  FICA Taxes Payable . Record the journal entry in the book of Company P on April 15 for the payroll taxes as follows: Debit ($) Credit ($) 2 0 3 5 00 8 7 4 4 00 1 1 7 4 00 2 3 3 3 20 7 8 4 00 6 7  Payroll taxes are expenses and increased by $2.HI is a liability an increased by $174.20  $784.00  SUTA taxes payable are liabilities and increased by $333. Therefore.OASDI is a liability and increased by $744. credit FICA Taxes Payable .035.00  $174.20. Therefore.So. Ref.20  FUTA taxes payable are liabilities and increased by $784.00. Therefore.20. credit SUTA taxes payable with $333. credit FUTA taxes payable with $784.20 ……(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. Therefore.20.OASDI with $744.00.00  $333.00.