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P11-26A Computing and journalizing payroll amounts

Louis Welch is general manager of United Salons. During 2014, Welch worked for

the company all year at a $10,200 monthly salary. He also earned a year-end bonus

equal to 10% of his annual salary.

Welch's federal income tax withheld during 2014 was $850 per month, plus

$924 on his bonus check. State income tax withheld came to $70 per month, plus

$40 on the bonus. FICA tax was withheld on the annual earnings. Welch authorized

the following payroll deductions: Charity Fund contribution of 1% of total

earnings and life insurance of $5 per month.

United incurred payroll tax expense on Welch for FICA tax. The company

also paid state unemployment tax and federal unemployment tax. In addition,

United provides Welch with health insurance at a cost of $150 per month. During

2014, United paid $4,000 into Welch's retirement plan.

1. Net Pay $114,654

Requirements

1. Compute Welch's gross pay, payroll deductions, and net pay for the full year

2014. Round all amounts to the nearest dollar.

2. Compute United's total 2014 payroll expense for Welch.

3. Make the journal entry to record United's expense for Welch'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