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P13-4 (Payroll Tax Entries) Below is a payroll sheet for Otis Import Company

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P13-4 (Payroll Tax Entries) Below is a payroll sheet for Otis Import Company for the month of September 2010. The company is allowed a 1% unemployment compensation rate by the state; the federal unemployment tax rate is 0.8% and the maximum for both is $7,000. Assume a 10% federal income tax rate for all employees and a 7.65% F.I.C.A. tax on employee and employer on a maximum of $102,000. In addition, 1.45% is charged both employer and employee for an employee’s wages in excess of $102,000 per employee.

Income
Earnings September Tax State Federal
Name to Aug. 31 Earnings Withholding F.I.C.A. U.C. U.C.
B.D. Williams $106,800 $10,800
D. Raye 6,500 700
K. Baker 7,600 1,100
F. Lopez 13,600 1,900
A. Daniels 105,000 13,000
B. Kingston 112,000 16,000

Instructions
(a) Complete the payroll sheet and make the necessary entry to record the payment of the payroll.
(b) Make the entry to record the payroll tax expenses of Otis Import Company.
(c) Make the entry to record the payment of the payroll liabilities created. Assume that the company
pays all payroll liabilities at the end of each month.

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