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Computing and Recording Employer's Payroll Tax Expense for Clifton’s Automotive Shop

This document outlines the steps for computing employer payroll taxes based on employee earnings at Clifton’s Automotive and Detail Repair Shop for the week ending April 8, 2007. It provides the necessary tax rates: Social Security (6.2%), Medicare (1.45%), FUTA (0.8%), and SUTA (2.2%). The total employer payroll tax expense is calculated, resulting in a journal entry to record liabilities such as Social Security and Medicare payable. Additionally, an analysis explores how a change in the FUTA tax rate would affect total payroll taxes.

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Computing and Recording Employer's Payroll Tax Expense for Clifton’s Automotive Shop

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  1. Sample Problem Chapter 11

  2. Computing and recording employer’s payroll tax expense. • The payroll register of Clifton’s Automotive and Detail Repair Shop showed total employee earnings of • $2,890 for the week ended April 8, 2007. • INSTRUCTIONS • Compute the employer’s payroll taxes for the period. The tax rates are as follows: • Prepare a general journal entry to record the employer’s payroll taxes for the period. • Analyze: If the FUTA tax rate had been 1.2 percent, what total employer payroll taxes would have • been recorded?

  3. Computing employer’s payroll tax expense • Compute the employer’s payroll taxes for the period. The tax rates are as follows: Social security 6.2% x $2,890 = 179.18 Medicare 1.45% x $2,890 = 41.91 FUTA 0.8% x $2,890 = 23.12 SUTA 2.2 % x $2,890 = 63.58

  4. Recording employer’s payroll tax expense The general journal entry would be: Payroll tax expense 307.79 Social security tax payable 179.18 Medicare tax payable 41.91 Federal Unemployment tax payable 23.12 State Unemployment tax payable 63.58

  5. Analyze If the FUTA tax rate had been 1.2%, the total employers payroll taxes would have been $319.35. $2,890 x 1.2% = 34.68 34.68+179.18+41.91+63.58=319.35

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