Question

Will Johnson's employer has the following payroll liabilities:

Medicare tax on Will's gross income at 1.5%
Social Security tax on Will's gross income at 6%
Federal Unemployment Tax Act at 5.4% on the first $7,000/employee
State Unemployment Tax Act at .8% on the first $7,000/employee
5% pension match of Will's gross income
Compute the amounts that make up these withholdings
Journalize the employer portion of the liabilities

Answer 1

To compute the employer's payroll liabilities for an employee, apply the given tax rates to the employee's gross income and journalize the resulting amounts. Illustratively, if the gross income is $50,000, apply rates for Medicare, Social Security, FUTA, SUTA and a pension match to determine the liabilities due.

Step-by-step explanation:

To calculate the employer's payroll liabilities for Will Johnson, you would need to apply the respective tax rates to Will's gross income. Note that the Federal Unemployment Tax Act (FUTA) and the State Unemployment Tax Act (SUTA) are only applied on the first $7,000 of an employee's income.

Medicare tax at 1.5% (which is typically 1.45%, but we'll use the rate provided), Social Security tax at 6% (typically this is 6.2%, but we'll again defer to rates provided), FUTA at 5.4%, SUTA at 0.8%, and a 5% pension match of Will’s gross income. For illustration, if Will’s gross income were $50,000, the calculations would be as follows:

• Medicare: $50,000 x 1.5% = $750
• Social Security: $50,000 x 6% = $3,000
• FUTA: $7,000 x 5.4% = $378
• SUTA: $7,000 x 0.8% = $56
• Pension Match: $50,000 x 5% = $2,500

To journalize these amounts, the entries would be made in the employer's accounting records to reflect the accrual of these liabilities at each payroll period.