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Question 1

For all payroll calculations, use the following tax rates and round amounts to the nearest cent.

Employee: OASDI: 6.1% on first $114,000 earned; Medicare: 1.36% up to $400,000, 2.24% on earnings above $400,000.

Employer: OASDI: 6.1% on first $114,000 earned; Medicare: 1.36%; FUTA: 0.6% on first $7,000 earned; SUTA: 5% on first $7,000 earned.

Reyes's Mexican Restaurant incurred salaries expense of $60,000 for 2020. The payroll expense includes employer FICA tax, in addition to state unemployment tax and federal unemployment tax. Of the total salaries, $13,000 is subject to unemployment tax. Also, the company provides the following benefits for employees:

  • health insurance (cost to the company, $2,900)
  • life insurance (cost to the company, $350)
  • and retirement benefits (cost to the company, 7% of salaries expense).

Journalize the employee benefits and payroll taxes for Reyes's Mexican Restaurant.