Question - For the one-week pay period ended January 6, the payroll records of Cooper Kettle show that employees earned total salaries of $19,000.
Amounts withheld consisted of social security taxes computed at an assumed rate of 6.0%, Medicare taxes computed at an assumed rate of 1.5%, federal income taxes of $2,120, and child support payments of $1,250.
State unemployment taxes are levied at a rate of 5.4%, and federal unemployment taxes at a rate of 0.8%. As this is the first pay period within a new year, no employee has yet earned more than the $7,000 base for unemployment taxes. The premium rate for workers' compensation insurance is 2% of total wages.
The weekly payroll is recorded on Friday, January 6, and paychecks will be issued to employees on Monday, January 9.
Required:
Prepare separate general journal entries to record the (1) salaries earned by employees, amounts withheld, and liability for net pay; (2) payroll taxes levied upon the employer; (3) issuance of paychecks.
Compute the total cost to Cooper Kettle of employee compensation for the first week of January.
Assuming no change in pay rates, tax rates, or number of employees, would you expect the total cost of Cooper Kettle's weekly payroll to increase or decrease as the year progresses? Explain.