Purpose: (L.O. 1, 2) This exercise will review the computations and journal entries relating to payroll accounting.
Hunt Enterprises has six salaried office employees who get paid on the last day of each month. Information about employee earnings for the current month (December 2014) and cumulative earnings for the first eleven months of 2014 appear on the next page. Data on federal income tax withholdings and health insurance withholdings is also provided.
The tax rates in effect are as follows:
FICA: 8% on gross earnings of up to $50,000
Federal unemployment taxes: 0.8% on gross earnings of up to $7,000
State unemployment taxes: 5.4% on gross earnings of up to $7,000
(a) Compute the following items for December 2014 for each employee listed and fill in your answers on the schedule provided.
(b) Prepare the journal entries to record:
(c) Explain how the balances of the payable accounts will be reported on the financial statements.
TIP: Fixed amounts of compensation paid per week, month, or even per year, regardless of the number of hours worked during the designated period, are referred to as salaries. When an employee is paid a certain amount per hour, per day, or per unit, the compensation ...