In preparing for next year, on December 1 Tony Freedman hired two hourly employees to assist with some troubleshooting and repair work.
1. Prepare a payroll register for the three pay periods.
2. Record the following transactions in the general journal and post them to the general ledger.
Assume the following transactions:
Dec. 7 Paid employee wages: Lance Kumm, 38 hours, and Anthony Hall, 42 hours.
Dec. 14 Paid employee wages: Lance Kumm, 25 hours, and Anthony Hall, 36 hours.
Dec. 21 Paid employee wages: Lance Kumm, 26 hours, and Anthony Hall, 35 hours.
a. The following accounts have been added to the chart of accounts: Wages Payable #2010, FICA OASDI Payable #2020, FICA Medicare Payable #2030, FIT Payable #2040, State Income Tax Payable #2050, FUTA Tax Payable 2060, SUTA Tax Payable #2070, 2010 Wages Expense #5110, and Payroll Tax Expense #5120.
b. Assume FICA OASDI is taxed at 6.2% up to 106,800 in earnings and Medicare is taxed at 1.45% on all earnings.
c. State income tax is 2% of gross pay.
d. None of the employees has federal income tax taken out of his or her pay.
e. Each employee earns $10 an hour and is paid 1½ times salary for hours worked in excess of 40 weekly.
As December comes to an end, Tony Freedman wants to take care of his payroll obligations. He will complete Form 941 for the fourth quarter of the current year and Form 940 for federal unemployment taxes. Tony will make the necessary deposits and payments associated with his payroll.