Assignment
Part 1:
XYZ Company pays its employees twice a month. Employee earnings and tax amounts for the pay period ending August 30 are:
| Gross Earnings (Salary Expense) | $12,543.40 |
| Social Security Tax Payable | $777.69 |
| Medicare Tax Payable | $181.88 |
| Employees’ Federal Income Tax Payable | $662.00 |
| Employees’ State Income Tax Payable | $250.87 |
| Net Earnings (Total amount paid to employees) | $10,670.96 |
Record the payment of the payroll on this General Journal form: XYZ Journal. This same form will be used for all 3 parts of this assignment.
Part 2:
Using the above information from XYZ Company’s payroll for August 30, compute the employer’s portion of payroll tax expense. Employers match the 6.2% (.062) Social Security and 1.45% (.0145) Medicare amounts.
Hint: To Gross Earnings, multiply each tax percentage; in parenthesis beside each percentage is its decimal equivalent. All of the tax amounts will be held in individual Tax Payable accounts as credits until paid, and the debit for the total tax payable amounts will be to Payroll Tax Expense.
Next, journalize the employer’s payroll tax expenses that you just computed in the first paragraph of Part 2. Use the same General Journal form used in Part 1 above.
Part 3:
On September 2, XYZ Company prepares Check #1325 to the federal government for the taxes as listed in Part 1 (employees’ portion) and Part 2 (employer’s portion). Federal taxes consist of Social Security and Medicare (FICA taxes), and Employee’s Federal Income Tax Payable.
Hint: Remember that 6.2% Social Security and 1.45% Medicare is withheld from employees’ check and that same percentage is also matched by the employer—and now both employee and employer portions are being paid. Income Taxes are only withheld from employees’ checks. You are decreasing liabilities (tax payables) because you are now paying the liabilities, and also decreasing Cash in Bank because you are issuing checks.
On September 2, XYZ Company prepares Check #1326 to the State government to pay Employees State Income Tax Payable as listed in Part 1.
Journalize both of these September 2 transactions for payment of taxes. Use the same General Journal form used for Parts 1 and 2.
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