1. Accounting April 21, 2015 Critical Thinking Notes for 13.1 and 13.2
WT & OYO 13.1 and 13.2
LESSON 13-1

2. Critical Thinking
Vadillo Lumber currently requires each employee to inform the accounting clerk of the total hours worked each day during the pay period. The total number of hours worked by all employees has been steadily increasing during recent pay periods.
The new store manager has suggested that a time clock be installed to record arrival and departure times. The accounting clerk believes the current system is satisfactory.
Do you agree with the new manager or the accounting clerk? Explain your response.
LESSON 13-1

3. Critical Thinking
Wyatt Company has decided to hire a sales representative. The business can afford to pay the representative a salary of only $30,000.
The accounting assistant informs the manager that hiring the representative will cost the business more than the $30,000 salary.
Do you agree with the accounting assistant? Explain your response.
LESSON 13-1

4. LESSON 13-1 Recording A Payroll
4/27/2017
LESSON 13-1
Recording A Payroll

5. DIFFERENT FORMS OF PAYROLL INFORMATION
Payroll information for each pay period is recorded in a payroll register
Also recorded on each employee earnings record
Accounts are kept in the general ledger to summarize total earnings and deductions for ALL employees
Various quarterly and annual payroll tax reports are required to report the payment of payroll taxes
LESSON 13-1

6. PAYROLL REGISTER
page 369
The column totals of payroll register provide the debit and credit amounts needed to journalize payroll
Journal entries use: Earnings Total, Net Pay, and each deduction column
LESSON 13-1

7. ANALYZING PAYMENT OF A PAYROLL
Total Earnings column total is the salary expense for the period
Turn to page 370
LESSON 13-1

8. ANALYZING PAYMENT OF A PAYROLL
page 370
LESSON 13-1

9. JOURNALIZING PAYMENT OF A PAYROLL
page 371
December 15. Paid cash for payroll, $4, Check No. 335. 2 1 3 4 5 6 7
1. Write the date.
5. Write the total amount paid to employees.
2. Write the title of the account debited.
6. Write the titles of accounts credited.
3. Write the check number.
7. Write the amounts credited.
4. Write the account debited.
LESSON 13-1

10. Recording Employer Payroll Taxes
LESSON 13-2
Recording Employer Payroll Taxes

11. CALCULATING EMPLOYER PAYROLL TAXES
Employers must pay to the government the taxes withheld from employee earnings
Federal income tax
Social Security tax
Medicare tax
They are liabilities to the business until they are actually paid to the government
LESSON 13-1

12. CALCULATING EMPLOYER PAYROLL TAXES
In addition, employers must pay several of their own payroll taxes
Social Security tax
Medicare tax
State unemployment tax
Federal unemployment tax
Employer payroll taxes are considered expenses
LESSON 13-1

13. UNEMPLOYMENT TAXABLE EARNINGS
page 374 2 1 3
1. Enter accumulated earnings and total earnings for each employee.
2. Enter unemployment taxable earnings.
3. Total the Unemployment Taxable Earnings column.
Unemployment taxable earnings – applied to the first $7,000 earned by
each employee for each calendar year
LESSON 13-2

14. UNEMPLOYMENT TAXES
Federal unemployment tax – federal tax used for state and federal administrative expenses of the unemployment program; typically 6.2% of the first $7,000
Employers can deduct up to 5.4% of the amounts paid for State Unemployment Tax so the effective federal unemployment tax rate in most states is .8%
State unemployment tax – state tax used to pay benefits to unemployed workers
Many states require that employers pay 5.4% on the first $7,000 earned by each employee
LESSON 13-1

15. UNEMPLOYMENT TAXES Federal Unemployment Tax =
page 375
Federal Unemployment Tax =
Federal Unemployment Tax Rate ×
Unemployment Taxable Earnings
$790.00 ×
0.8% =
$6.32
State Unemployment Tax =
State Unemployment Tax Rate ×
Unemployment Taxable Earnings
$790.00 ×
5.4% =
$42.66
LESSON 13-2

16. JOURNALIZING EMPLOYER PAYROLL TAXES
LESSON 13-2
4/27/2017
JOURNALIZING EMPLOYER PAYROLL TAXES
page 376
(continued on next slide)
December 15. Recorded employer payroll taxes expense, $485.92, for the semimonthly pay period ended December 15. Taxes owed are: social security tax, $354.11; Medicare tax, $82.83; federal unemployment tax, $6.32; state employment tax, $ Memorandum No. 63.
LESSON 13-2
GREEN

17. JOURNALIZING EMPLOYER PAYROLL TAXES
LESSON 13-2
4/27/2017
JOURNALIZING EMPLOYER PAYROLL TAXES
(continued from previous slide)
page 376 2 4 1 3 5 6
1. Write the date.
4. Write the debit amount.
2. Write the title of the expense account debited.
5. Write the titles of the liability accounts credited.
3. Write the memorandum number.
6. Write the credit amounts.
LESSON 13-2
GREEN

18. JOURNALIZING EMPLOYER PAYROLL TAXES
Payroll taxes expense is recorded in the general journal as a debit
The amounts owed for Social Security, Medicare, federal unemployment and state unemployment are recorded as a credit to accounts payable.
LESSON 13-1