LESSON 13-1

Recording A Payroll

PAYROLL REGISTERpage 369

Until payroll is recorded in the journal and then posted to the ledger accounts, the accounts are not up to date.

Salary Expense

Debited

Cash

Credited

Liabilities

Credited

ANALYZING PAYMENT OF A PAYROLL page 370

Total Earnings

Net Pay

Deductions

JOURNALIZING PAYMENT OF A PAYROLL page 371

December 15. Paid cash for payroll, $4,609.46. Check No. 335.

Audit Your Understanding

What account title is used journalize the total earnings column of the payroll register?

• Salary ExpenseWhat account title is used to

journalize the federal income tax column of the payroll register?

• Employee Income Tax Payable

Audit Your Understanding

What account title is used to journalize a Social Security tax column in the payroll register?

• Social Security Tax Payable

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13-2 New Vocabulary

• Federal Unemployment Tax: A federal tax used for state and federal administrative expenses of the unemployment program

• State Unemployment Tax: A state tax used to pay benefits to unemployed workers

UNEMPLOYMENT TAXABLE EARNINGS

22

33

page 374

111. Enter accumulated earnings and total earnings for

each employee.2. Enter any unemployment taxable earnings.

3. Total the Unemployment Taxable Earnings column.

First:

• Determine if the tax base has been met.

FederalUnemployment

Tax=

FederalUnemployment

Tax Rate×

UnemploymentTaxableEarnings

StateUnemployment

Tax=

StateUnemployment

Tax Rate×

UnemploymentTaxableEarnings

UNEMPLOYMENT TAXESpage 375

$6.32=0.8%×$790.00

$42.66=5.4%×$790.00

2 Taxes

JOURNALIZING EMPLOYER

PAYROLL TAXESpage 376

December 15. Recorded employer payroll taxes expense, $485.92, for the semimonthly pay period ended December 15. Taxes owed are: social security tax, $354.11; Medicare tax, $82.83; federal unemployment tax, $6.32; state employment tax, $42.66. Memorandum No. 63.

(continued on next slide)

JOURNALIZING EMPLOYER

PAYROLL TAXESpage 376(continued from previous slide)

Audit Your Understanding

• What is the tax rate Hobby Shack must pay on employees for each of the following taxes: Social Security, Medicare, federal unemployment, and state unemployment?– Social Security: 6.2% of earnings up to a

maximum of $87,000 in each calendar year; – Medicare: 1.45% of total employee earnings; – Federal unemployment: 0.8% on the first

$7,000 earned by each employee; – State unemployment: 5.4% on the first $7,000

earned by each employee

Audit Your Understanding

What is the amount of each employee’s total earnings that are subject to federal and state unemployment taxes at Hobby Shack?

• Only the first $7,000 each employee earns

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13-3 EMPLOYER ANNUAL REPORT TO EMPLOYEES OF

TAXES WITHHELDpage 378

EMPLOYER’S QUARTERLY FEDERAL

TAX RETURNpage 379

(continued on next slide)

11

22

1. Heading 2. Number of employees

EMPLOYER’S QUARTERLY FEDERAL TAX RETURN page 379

(continued on next slide)

3. Total quarterly earnings

4. Income tax withheld

5. Employee and employer social security and Medicare taxes 7. Total taxes

6. Social security plus Medicare taxes

44

55

33

66

77

EMPLOYER’S QUARTERLY FEDERAL TAX RETURN

page 379(continued from previous slide)

88 88 8899

8. Total taxes for each month

9. Total taxes

EMPLOYER ANNUAL REPORTING OF PAYROLL

TAXES page 381

Audit Your Understanding

When must employers provide a W–2 statement to their employees?

• By January 31What taxes are included in the

quarterly federal tax return filed by the employer?

• Federal income tax, Social Security tax, and Medicare tax

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LESSON 13-4 New Vocabulary

• Lookback Period: The 12-month period that ends on June 30 of the prior year– (Helps to determine when payroll

taxes are due to the government.)

PAYING THE LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX,

AND MEDICARE TAX page 383

FORM 8109, FEDERAL DEPOSIT COUPONpage 384

JOURNALIZING PAYMENT OF LIABILITY FOR EMPLOYEE INCOME TAX, SOCIAL SECURITY TAX, AND MEDICARE TAX page 385

January 15. Paid cash for liability for employee income tax, $757.00; social security tax, $1,451.38; and Medicare tax, $339.42; total, $2,547.80. Check No. 347.

PAYING THE LIABILITY FOR FEDERAL UNEMPLOYMENT TAX page 386

JOURNALIZING PAYMENT OF LIABILITY FOR FEDERAL UNEMPLOYMENT TAX

11 22 33 44 55

page 387

January 31. Paid cash for federal unemployment tax liability for quarter ended December 31, $34.60. Check No. 367.

JOURNALIZING PAYMENT OF LIABILITY FOR STATE UNEMPLOYMENT TAX page 387

January 31. Paid cash for state unemployment tax liability for quarter ended December 31, $233.55. Check No. 368.

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IQ Test (for Professionals)

• How do you put a giraffe into a refrigerator?

• Open the refrigerator door, put the giraffe in, and close the door.

• This question tests whether or not you do simple things in a complicated way.

IQ Test• How do you put an elephant

into a refrigerator?• Open the refrigerator door,

take the giraffe out, put the elephant in, and close the door.

• This question tests your prudence and practicality.

IQ Test• The Lion King is hosting an

animal conference. All animals except one attend. Which one does not attend?

• The elephant. The elephant is still in the refrigerator.

• This question tests whether or not you have comprehensive thinking skills.

IQ Test• If you did not answer the

first three questions correctly, this next question is your last chance to show your qualifications as a professional.

IQ Test• There is a river inhabited by

crocodiles. How do you manage to get to the other side?

• Swim through it. All of the animals, including the crocodiles, are attending the animal conference. (Except for the elephant, of course.)

IQ Test• Don’t be frustrated if you failed

this test. According to Anderson Consulting Worldwide, about 90% of the professionals failed the test.

• However, many preschoolers got it correct, thus disproving the popular theory that most “professionals” have the brains of a four-year old.

The End