Problem 9-23A: Accounting for payroll and payroll taxes

Electronics Service Co. pays salaries monthly on the last day of the month. The following information is available from Electronics for the month ended December 31, Year 1:

• Administrative salaries $96,000
• Sales salaries $57,000
• Office salaries $38,000

Assume the Social Security tax rate is 6 percent on the first $110,000 of salaries. Duke reached the $110,000 amount in September. His salary in December amounted to $11,500 and is included in the $96,000. No one else will reach the $110,000 amount for the year. None of the employee salaries are subject to unemployment tax in December. Other amounts withheld from salaries in December were as follows:

• Federal income tax $21,500
• State income tax $11,200
• Employee savings plan $4,000

Required

a. Prepare the journal entry to record the payment of payroll on December 31, Year 1.

b. Prepare the journal entry to record the payroll tax expense for Electronics Service Co. for December Year 1.

Problem 9-24A Computation of net pay and payroll expense

The following information is available for the employees of Webber Packing Company for the first week of January Year 1:

1. Kayla earns $28 per hour and 1½ times her regular rate for hours over 40 per week. Kayla worked 52 hours the first week in January. Kayla’s federal income tax withholding is equal to 15 percent of her gross pay. Webber pays medical insurance of $50 per week for Kayla and contributes $50 per week to a retirement plan for her.
2. Paula earns a weekly salary of $1,600. Paula’s federal income tax withholding is 18 percent of her gross pay. Webber pays medical insurance of $80 per week for Paula and contributes $100 per week to a retirement plan for her.
3. Vacation pay is accrued at the rate of 2 hours per week (based on the regular pay rate) for Kayla and $60 per week for Paula.

Assume the Social Security tax rate is 6 percent on the first $110,000 of salaries and the Medicare tax rate is 1.5 percent of total salaries. The state unemployment tax rate is 5.4 percent and the federal unemployment tax rate is 0.6 percent of the first $7,000 of salary for each employee.

Required

a. Compute the gross pay for Kayla for the first week in January.

b. Compute the net pay for both Kayla and Paula for the first week in January.

c. Prepare the journal entry to record the payment of the payroll for the week.

d. Prepare the journal entry to record the payroll tax expense and fringe benefit expense for Webber Packing Company for the week.

e. What is the total cost of compensation expense for the first week of January Year 1 for Webber Packing Company?