Allison Hardware Company's payroll for November 2010 is summarized below.
Amount Subject to Payroll Taxes
Unemployment Tax
Payroll Wages Due F.I.C.A Federal State
Factory $140,000 $140,000 $40,000 $40,000
Sales 32,000 32,000 4,000 4,000
Administrative 36,000 36,000 ----- -----
Total $208,000 $208,000 $44,000 $44,000
At this point in the year some emplyees have already received wages in excess of those to which payroll taxes apply. Assume that the state unemployment tax is 2.5%. The F.I.C.A. rate is 7.65% on an employee's wages to $102,000 and 1.45% in excess of $102,000. Of the $208,000 wages subject to F.I.C.A. tax, $20,000 of the sales wages is in excess of $102,000. Federal unemployment tax rate is 0.8% after credits. Income tax withheld amounts to $16,000 for factory, $7,000 for sales, and $6,000 for administrative.
Instructions:
Q1. Prepare a schedule showing the employer's total cost of wages for November by function.
Q2. Prepare the journal entries to record the factory, sales, and administrative payrolls including the employer's payroll taxes.