Payroll Lesson 1 2023-24

Accounting 1 Payroll

SS, Medicare, State, Federal Tax Calculations and Journal entries that result. 5.02

Payroll Taxes

n Taxes based on the payroll of a business are called payroll taxes

n A business is required by law to withhold certain payroll taxes from employee salaries

n All payroll taxes are based on employee total earnings

n Payroll taxes withheld represent a liability for the employer until payment is made to the government

n Federal & state governments may charge a business a penalty for failure to pay correct payroll taxes when they are due

Subject | Subject

Source: Lesson 12-1 www.wsfcs.k12.nc.us

Employee Payroll Deductions

How to Calculate Payroll

• Step 1 Calculate Gross Pay (10 regular hours at $20/hour) gross pay would be $200.

• Step 2 Calculate Employee Tax Withholdings (Tax table and percentages used) Our example pretend Federal withholding based on the table is ($8) and State at 6.5% is ($13)

• Step 3 Calculate Social Security 6.20% ($12.40)

• Step 4 Calculate Medicare 1.45% ($2.90)

• Step 5 Add the withholding together ($36.30)

• Step 6 Net Pay (Gross - Step 5 total) for this example would be ($163.70)

Subject | Subject

Some text here about the topic of discussion

Multiple Choice

If an employee has gross earnings of $300.00 and total deductions of $126.75. What is the employee's net pay?

• $426.75

• $300.00

• $173.25

• $126.75

Multiple Choice

Andy's Supply pays its employees every week. Taxes are withheld based on the following percentages:

SS Withholding: 6.20%

Medicare Withholding: 1.45%

Federal Income Tax Withholding: Tax Tables

State Income Tax Withholding: 6.50%

Sandra Smith is Married with 0 Allowances with gross pay of $425.00

Kelly Crawgill is Single with 1 Allowance with gross pay of $600

What is the state withholding tax amount for Kelly?

• $2.76

• $27.63

• $39.00

• $390.00

Multiple Choice

Travel Sports has the following payroll information:

Tanner ~35 hours worked ~$12/hr pay rate ~2% commission ~$2,500 Sales

Meghan ~43 hours worked ~$10/hr pay rate ~2% commission ~$1,750 Sales

Keean ~45 hours worked ~$9/hr pay rate ~no commission ~ not in sales

Carl ~ 1 week worked ~$65,000/yr ~no commission ~ not in sales.

What is Tanner's gross earnings for the pay period?

• $470.00

• $370.00

• $420.00

• $920.00

Multiple Choice

Andy's Supply pays its employees every week. Taxes are withheld based on the following percentages:

SS Withholding: 6.20%

Medicare Withholding: 1.45%

Federal Income Tax Withholding: Tax Tables

State Income Tax Withholding: 6.50%

Sandra Smith is Married with 0 Allowances with gross pay of $425.00

Kelly Crawgill is Single with 1 Allowance with gross pay of $600

What is the Social Security withholding for Sandra?

• $263.50

• $27.63

• $37.20

• $26.35

Multiple Choice

Travel Sports has the following payroll information:

Tanner ~35 hours worked ~$12/hr pay rate ~2% commission ~$2,500 Sales

Meghan ~43 hours worked ~$10/hr pay rate ~2% commission ~$1,750 Sales

Keegan ~45 hours worked ~$9/hr pay rate ~no commission ~ not in sales

Carl ~ 1 week worked ~$65,000/yr ~no commission ~ not in sales.

What are the gross earnings for Keegan this pay period?

• $360.00

• $405.00

• $607.50

• $427.50

Multiple Choice

If an employer pays federal unemployment taxes of $45. What is the correct entry to journalize the payment of unemployment taxes?

• debit Federal Unemployment Tax Payable, $45; credit Cash $45

• debit Payroll Tax Expense, $45; credit Cash $45

• debit Cash, $45; cerdit Federal Unemployment Tax Payable, $45

• debit Federal Unemployment Tax Payable, $45; credit Payroll Tax Expense, $45

Multiple Choice

If an employee has gross earnings of $300.00 and total deductions of $126.75. What is the employee's net pay?

• $426.75

• $300.00

• $173.25

• $126.75

An entry to record payroll expenses and
deductions for an employee might look like this.

Recording Employee Payroll
Deductions

Salaries Payable 1,524
Cash 1,524
To record payment to employee

Multiple Choice

If an employee has gross earnings of $245.00, Social Security Withholding of $15.19, Medicare withholding of $3.55, a federal income withholding tax of $50, and state income tax withholding of $15.03. What is the net pay?

• $329.67

• $84.67

• $161.23

• $126.75

Multiple Choice

Andy's Supply pays its employees every week. Taxes are withheld based on the following percentages:

SS Withholding: 6.20%

Medicare Withholding: 1.45%

Federal Income Tax Withholding: Tax Tables

State Income Tax Withholding: 6.50%

Sandra Smith is Married with 0 Allowances with gross pay of $425.00

Kelly Crawgill is Single with 1 Allowance with gross pay of $600

What is the state withholding tax amount for Kelly?

• $2.76

• $27.63

• $39.00

• $390.00

Multiple Choice

Andy's Supply pays its employees every week. Taxes are withheld based on the following percentages:

SS Withholding: 6.20%

Medicare Withholding: 1.45%

Federal Income Tax Withholding: Tax Tables

State Income Tax Withholding: 6.50%

Sandra Smith is Married with 0 Allowances with gross pay of $425.00

Kelly Crawgill is Single with 1 Allowance with gross pay of $600

What is the Social Security withholding for Sandra?

• $263.50

• $27.63

• $37.20

• $26.35

Multiple Choice

Travel Sports has the following payroll information:

Tanner ~35 hours worked ~$12/hr pay rate ~2% commission ~$2,500 Sales

Meghan ~43 hours worked ~$10/hr pay rate ~2% commission ~$1,750 Sales

Keean ~45 hours worked ~$9/hr pay rate ~no commission ~ not in sales

Carl ~ 1 week worked ~$65,000/yr ~no commission ~ not in sales.

What is Tanner's gross earnings for the pay period?

• $470.00

• $370.00

• $420.00

• $920.00

Multiple Choice

Travel Sports has the following payroll information:

Tanner ~35 hours worked ~$12/hr pay rate ~2% commission ~$2,500 Sales

Meghan ~43 hours worked ~$10/hr pay rate ~2% commission ~$1,750 Sales

Keegan ~45 hours worked ~$9/hr pay rate ~no commission ~ not in sales

Carl ~ 1 week worked ~$65,000/yr ~no commission ~ not in sales.

What are the gross earnings for Keegan this pay period?

• $360.00

• $405.00

• $607.50

• $427.50

Employers Share Taxes

•FICA tax (employer’s share)

–Calculate Social Security amount (using 6.2%, $84,9000 ceiling)

–Calculate Medicare amount (using 1.45%)

•State unemployment tax (SUTA)

–Levied only on the employer in most states

–Rate varies by state (book assumes 5.4%, $7,000 ceiling)

–Pays subsistence benefits to unemployed workers

•Federal unemployment tax (FUTA)

–Levied only on the employer

–Rate varies (book assumes 0.80%, $7,000 ceiling)

–Used to administer federal unemployment fund 

NEW Account Federal Unemployment Tax Payable (credit account)

An entry to record payroll expenses and
deductions for an employee might look like this.

Recording Employee Payroll
Deductions

Salaries Payable 1,524
Cash 1,524
To record payment to employee

Multiple Choice

If an employer pays federal unemployment taxes of $45. What is the correct entry to journalize the payment of unemployment taxes?

• debit Federal Unemployment Tax Payable, $45; credit Cash $45

• debit Payroll Tax Expense, $45; credit Cash $45

• debit Cash, $45; cerdit Federal Unemployment Tax Payable, $45

• debit Federal Unemployment Tax Payable, $45; credit Payroll Tax Expense, $45