Exam 6: Analyzing and Journalizing Payroll

Since the FUTA tax is a social security tax, it can be charged to the same expense account as the other payroll taxes on the employer, the payroll taxes account.

Service charges that are passed on to the employee by the employer are not part of the disposable earnings subject to garnishment.

The total of the net amount paid to employees each payday is credited to either the cash account or the salaries payable account.

The adjusting entry to record the accrued vacation pay at the end of an accounting period includes credits to the tax withholding liability accounts.

The payroll taxes account is an expense account that is debited for the FICA, FUTA, and SUTA taxes on the employer.

The employers' OASDI portion of FICA taxes is included as part of the payroll tax entry, but the employer's HI portion of FICA taxes is not.

Direct deposit of paychecks can be forced on employees in every state.

Exhibit 6-1 The totals from the first payroll of the year are shown below. Refer to Exhibit 6-1 . Journalize the entry to record the employer's payroll taxes (assume a SUTA rate of 3.7%).

FIT Payable is a liability account used to record employees' withheld federal income tax and also the employer's match of that tax.

Since vacation time is paid when used, there is no need to accrue this time in a liability account at the end of each accounting period.

FICA Taxes Payable-OASDI is a liability account debited for the employer's portion of the FICA tax.

A debit to the employees FIT payable account removes the liability for the amount of federal income taxes withheld from employees' wages.

Under the Consumer Credit Protection Act, disposable earnings are the earnings remaining after any deductions for health insurance.

When recording the employer's payroll taxes, a liability account entitled Employers Payroll Taxes Payable is credited for the total taxes owed (FICA, FUTA, and SUTA).

The information needed in preparing a journal entry to record the wages earned, deductions from wages, and net amount paid each payday is obtained from the payroll register.

Amounts withheld from employees' wages for health insurance are credited to a liability account.

Federal tax levies are not subject to the limits imposed on garnishments under the Consumer Credit Protection Act.

If wages are paid weekly, postings to the employee's earnings record would be done once a month.

Exhibit 6-1 The totals from the first payroll of the year are shown below. Refer to Exhibit 6-1 . Journalize the entry to deposit the FICA and FIT taxes.

The payroll register is used by employers in completing Forms W-2.