The payroll register of Seaside Architecture Company indicates $870 of social security and $217 of Medicare tax withheld on total salaries of $14,500 for the period. Assume earnings subject to state and federal unemployment compensation taxes are $5,250 at the federal rate of 0.8% and state rate of 5.4%. Prepare the journal entry to record the payroll tax expense for the period.

Solution:

Account Titles & Explanation                 Debit          Credit

Payroll Tax Expense                            1,412.50  

Social Security Taxes Payable                                    870.00

Medicare Taxes Payable                                            217.00

State Unemployment Tax Payable ($5,250*5.4%)    283.50

Federal Unemployment Tax Payable ($5,250*0.8%)   42.00

Note:

Payroll tax expense is calculated by adding up soc security, medicare tax, state and fed unemployment.

example 2 – simplify: step 1: completely factor both the numerators and denominators of all fractions. step 2: change the division sign to a multiplication sign and flip (or reciprocate) the fraction after the division sign; essential you need to multiply by the reciprocal. step 3 : cancel or reduce the fractions.