Question

BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $128,400 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to its employee.

	Gross Pay through August 31					Gross Pay for September
a.		$	5,900				$	1,400
b.			2,700					2,800
c.			123,500					9,400

Compute BMX’s amounts for each of these four taxes as applied to the employee’s gross earnings for September under each of three separate situations (a), (b), and (c). (Round your answers to 2 decimal places.)

Assuming situation (a), prepare the employer’s September 30 journal entries to record salary expense and its related payroll liabilities for this employee. The employee’s federal income taxes withheld by the employer are $80 for this pay period.

Assuming situation (a), prepare the employer’s September 30 journal entries to record the employer’s payroll taxes expense and its related liabilities.

Answer 1

1
Taxes to be Withheld From Gross Pay (Employee-Paid Taxes)
	September Earnings Subject to Tax	Tax Rate	Tax Amount
Federal income tax			80.00
FICA—Social Security	1400	6.20%	86.80
FICA—Medicare	1400	1.45%	20.30
Total taxes withheld			187.10
Date	General Journal	Debit	Credit
Sep 30	Salaries expense	1400.00
	FICA—Social Security taxes payable		86.80
	FICA—Medicare taxes payable		20.30
	Employee federal income taxes payable		80.00
	Salaries payable		1212.90
2
Employer Payroll taxes	September earnings subject to tax	Tax Rate	Tax Amount
FICA-Social Security	1400	6.20%	86.80
FICA-Medicare	1400	1.45%	20.30
FUTA	1100	0.60%	6.60
SUTA	1100	5.40%	59.40
Total Payroll Taxes Expense			173.10
Date	General Journal	Debit	Credit
Sep. 30	Payroll taxes expense	173.10
	FICA—Social security taxes payable		86.80
	FICA—Medicare taxes payable		20.30
	Federal unemployment taxes payable		6.60
	State unemployment taxes payable		59.40
Note: Earnings taxable for FUTA and SUTA in (a) = 7000-5900 = $1100