A Company's Payroll for the Week Ended May 15 Included

question 57

Essay

A company's payroll for the week ended May 15 included earned salaries of $20,000.All of that week's pay is subject to FICA Social Security taxes of 6.2% and Medicare taxes of 1.45%.In addition,the company withholds the following amounts for this weekly pay period: $900 for medical insurance; $3,400 for federal income taxes; and $180 for union dues.
a.Prepare the general journal entry to accrue the payroll.
b.The company is subject to state unemployment taxes at the rate of 2% and federal unemployment taxes at the rate of 0.8%.By May 15,some employees had earned over $7,000,so only $9,000 of the $20,000 weekly gross pay was subject to unemployment tax.Prepare the general journal entry to accrue the employer's payroll tax expense.

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Definitions:

Product Cost

The total cost incurred to manufacture a product or to provide a service, including direct materials, labor, and overhead expenses.

Period Cost

Expenses that are not directly tied to the production process and are expensed in the period they are incurred, such as selling and administrative expenses.

Frosting

A sweet, often creamy glaze made of sugar with liquid (such as water or milk) and sometimes flavored, used to coat or decorate baked goods.

Prime Costs

The combined costs of direct materials and direct labor that are directly involved in the manufacturing of a product.