Question

McLoyd Company completed the salaries and wages payroll for March. The payroll provided the following details: Salaries and wages earned $ 550,000 Employee income taxes withheld 50,875 FICA taxes withheld 39,325 Unemployment taxes 3,825 Required: 1. Considering both employee and employer payroll taxes, use the preceding information to calculate the total labor cost for the company for March. 2, & 3. Prepare the journal entry to record the payroll for March, including employee deductions (but excluding employer payroll taxes) and record employer’s FICA taxes and unemployment taxes. Employees were paid in March but amounts withheld were not yet remitted.

Answer 1

Answer:

employer payroll taxes:

• FICA taxes (social security and medicare) = $39,325 ⇒ employer's FICA taxes are identical to the withheld FICA taxes from employees
• unemployment taxes = $3,825
• total = $39,325 + $3,825 = $43,150

1) total labor cost = total wages + total employer payroll taxes = $550,000 + $43,150 = $593,150

2)

March 31, wages and salaries

Dr Wage expense 550,000

    Cr Cash 459,800

    Cr Federal income tax withholding payable 50,875

    Cr FICA taxes withholding payable (employees) 39,325

 

3)

March 31, employer payroll taxes

Dr FICA taxes expense  39,325

Dr Unemployment tax expense 3,825

    Cr FICA taxes payable 39,325

    Cr Unemployment taxes payable 3,825

Answer 2

1. Here, we will calculate the total labor cost for the company for March. 2.

The computation of the employer payroll taxes:

FICA taxes (social security and medicare) = $39,325

Unemployment taxes = $3,825

Then, total employer payroll taxes is $43,150 ($39,325 + $3,825)

The total labor cost = Total wages + Total employer payroll taxes

The total labor cost = $550,000 + $43,150

The total labor cost = $593,150

2) Journal entry to record the payroll for March including the employee deductions but excluding employer payroll taxes

Date           Account titles                  Debit          Credit

March 31    Wages and salaries        $550,000

                            Federal income tax                   $50,875

                            withholding payable

                            FICA taxes withholding             $39,325

                            payable (employees)  

                            Cash                                           $459,800

3. Journal entry to Record employer’s FICA taxes and unemployment taxes.

Date                 Account titles                  Debit          Credit

March 31         FICA taxes expense        $43,150

                              FICA taxes payable                      $39,325

                              Unemployment taxes payable     $3,825

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