Page 68 - Account for Ag - 2019

10-16 Accounting for Agriculture CH 10]

6. Superior Fertilizer Co. pays its employees on Friday for a five-day (Monday-Friday) week ended on Wednesday. Assuming
that December 31, the last day of the fiscal year, falls on Tuesday, what days must be considered in determining the year-
end adjustments for wages?
7. Assume the same facts as in Question 7 except that December 31 falls on Saturday. (a) What days must be considered in
determining the year-end adjustment for wages? (b) After the year-end adjustment has been posted to Salaries Payable, the
balance of the account will represent the accrual for what period of time?

8. What records are used in preparing Withholding Statements (Form W-2) at the end of the year?

9. Under the federal income tax laws, when do the F.I.C.A. tax and unemployment compensation taxes become a liability?

EXERCISES

1. Robert R. Lake is employed at the rate of $8.75 per hour, with time-and-one-half for all hours in excess of 40 worked during a
week. Data to be considered in preparing the payroll record, Lake's pay-check, and his earnings record for the current week
ending September 20 are as follows: Hours worked, 46; Federal income tax withheld, $38; Cumulative earnings for year prior
to current week, $4,110.30; FICA tax withheld prior to current week, $254.84. Compute the following for the week ending
September 20: (a) Lake's earnings; (b) FICA tax to be withheld (6.2% to a maximum of $3600); (c) Take-home pay.

2. In the following summary of columnar totals of a payroll record, some amounts have been intentionally omitted: (Assume that this
information is for 4 employees with each claiming 2 dependants.)

Earnings: (6) State FUTA taxes ..................... 25.50
(1) At Regular Rate ................ $ 963.20 (7) Total ......................................... 402.50
(2) At overtime rate ................ _________ (8) Net Amount paid ...................... 1,291.05
(3) Total ................................. _________ Accounts debited:
Deduction: (9) Sales Salaries ........................... 852.50
(4) F.I.C.A. tax 105.00 (10) Office Salaries .......................... ________
(5) Fed Income tax withheld ________

(a) Determine the totals omitted in lines (2),(3),(5), and (10). (b) Present the general journal entry to record the payroll. (c)
Present, in general journal form, the entry to record payment of the payroll.

3. Total wage and salary expense of Peaceful Valley/Landry for the year was $100,000, of which $5,000 was exempt from the
FICA tax and $20,000 was exempt from state and federal unemployment taxes. Determine the employer's payroll tax expense
for the year, using the following rates: FICA,6.2%; State unemployment 3.4%; federal unemployment, 2.8%

4. According to a summary of the payroll records of Windy Farms for the four weekly payrolls paid in July, the amount of
earnings subject to the FICA tax is $9,646.30 and the amount subject to the unemployment compensation taxes is $7,823.65.
Assuming rates of 6.2%, 4.7% and 1.5%, present the general journal entry to record the payroll tax expense and taxes accrued
for the month.

PROBLEMS

10-1. Newell's Feed and Supply Co. has 5 employees. They are paid on an hourly basis, receiving time-and-one-half pay for
all hours worked in excess of 40 a week. The record of time worked for the week ending Saturday, September 28, together
with other relevant information, is summarized below:

Rate Vol. Income
Per Deduc- Tax
NAME No. M T W Th F S Hour tions Withheld
A 17 8 8 8 8 8 2 $6.50 $41.93
B 24 8 8 8 4 9 0 5.75 7.50 31.91
C 19 8 8 8 8 8 5 9.35 3.75 66.62
D 18 8 8 0 8 8 0 4.55 21.84
E 23 6 8 6 8 8 4 4.35 5.00 26.10

Cumulative earnings paid (before deductions) prior to the current week were: A, $2,700; B, $3,200; C,$4,120; D, $2,960; E,
$2,840. D is an office employee, A is a dock worker, and the rest are sales clerks. A group insurance deduction of $3.75 per
week is made from each employee's earnings. The following tax rates apply: FICA,6.2% on a maximum of $57,600 income;
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