Parrish Sales has two employees, Ana and Michael. Ana’s and Michael’s gross annu
ID: 2418936 • Letter: P
Question
Parrish Sales has two employees, Ana and Michael. Ana’s and Michael’s gross annual salary for 2016 was 118,000 and 204,000 respectively. The company pays 80% of their employees’ health premiums, while each employee is responsible for the other 20%. Ana paid 10,000 in health premiums, while Michael paid 15,000. The OASDI (social security) limit for 2016 is 118,500, and thus subject to FICA. Both employees are subject to federal and state income taxes. Assume that Ana’s federal tax rate is 30%, and Michael’s rate is 35%. Both are subject to NYS tax rate of 6%; FICA—OASDI Tax of 6.2% and FICA—Medicare Tax of 1.45% for the first 200,000 and 2.35% for any amount above 200,000.
A) Prepare the journal entries to record salaries expense and payroll withholdings. (5 Points)
B) Prepare the journal entry to record Parrish Sales Payroll expenses for 2016. (5 Points)
You must show all calculations!!!!
Explanation / Answer
A) Journal entry to record salary expense and payroll witholdings are as follows:
B) Journal entry to record payroll expenses
FICA -OASDI tax payable = (118000+204000)*6.2% = $19964
FICA—Medicare Tax payable = (118000 + 200000)*1.45% + 4000*2.35% = $4705
NYS taxes payable = (118000+204000)*6% = $19320
Federal taxes payable for Ana = (118000 - 7316 - 1711 - 7080-10000)*30% = $27567.90
Federal taxes payable for Michael = (204000 - 12648-2994-12240-15000)*35% = $56391.30
Particulars Debit Credit Salaries expense $322000 Salaries payable $322000 Payroll Taxes payable $24669 FICA -OASDI tax payable $19964 FICA-medicare tax payable $4705