Len Wilson is general manager of Crossroad Salons. During 2016, Wilson worked for the company all year at a $14,200 monthly salary. He also earned a year-end bonus equal to 10% of his annual salary.
Wilson’s federal income tax withheld during 2016 was $1,000 per month, plus $1,200 on his bonus check. State income tax withheld came to $130 per month, plus $70 on the bonus. FICA tax was withheld on the annual earnings. Wilson authorized the following payroll deductions: Charity Fund contribution of 3% of total earnings and life insurance of $ 10 per month.
Crossroad incurred payroll tax expense on Wilson for FICA tax. The company also paid state unemployment tax and federal unemployment tax.
1. Compute Wilson’s gross pay, payroll deductions, and net pay for the full year 2016. Round all amounts to the nearest dollar.
2. Compute Crossroad’s total 2016 payroll tax expense for Wilson.
3. Make the journal entry to record Crossroad’s expense for Wilson’s total earnings for the year, his payroll deductions, and net pay. Debit Salaries Expense and Bonus Expense as appropriate. Credit liability accounts for the payroll deductions and Cash for net pay. An explanation is not required.
4. Make the journal entry to record the accrual of Crossroad’s payroll tax expense for Wilson’s total earnings.