Question

Exercise 9-6 Payroll-related journal entries LO P2 BMX Company has one employee. FICA Social Security taxes are 6.20% of the first $117,000 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.60% and SUTA taxes are 2.90% of the first $7,000 paid to its employee. Gross Pay through August $5,800 Gross Pay for September $ 1,900 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 $294.50 for this pay period. (Round your answers to 2 decimal places.) Taxes to be Withheld From Gross Pay (Employee-Paid Taxes) September Earnings Subject to Tax Tax Rate Tax Amount Federal income tax $ 294.50

Answer 1

Taxes to be withheld from gross Pay (Employee – Paid Taxes)
	September earnings subject to tax (a)	Tax rate (b)	Tax Amount (a x b)
Federal Income tax			$294.50
FICA – Social Security tax	$1,900.00	6.20%	$117.80
FICA – Medicare tax	$1,900.00	1.45%	$27.55
Total taxes withheld			$439.85

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Journal entry to record salaries expense and its related payroll liabilities
Date	General Journal	Debit	Credit
Sept. 30	Salaries Expense	$1,900.00
	Employee Federal Income tax Payable		$294.50
	FICA - Social Security taxes Payable		$117.80
	FICA - Medicare taxes Payable		$27.55
	Salaries Payable               [Gross Salary – Deductions = $1,900 - $294.50 - $117.80 - $27.55]		$1,460.15
	(To record accrued salaries and related payroll liabilities)

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Note: 1- FICA Social Security's tax FICA - social security tax is payable on maximum wages of $117,000 Once an employee's year to date earnings or cumulative earnings exceed the wage base of $117,000, no additional Social Security tax is to be withheld from the employee's earnings. So, before calculating the FICA - social security tax, we have to check whether the September earnings along with cumulative earnings until August is exceeding $117,000 or not. If September earnings cumulative earnings until August is exceeding S 117,000, then Social Security tax = [($117,000 - Cumulative earnings until August) or gross salary whichever is lesser] x 6.20%. and if it is not, then Social Security tax Gross pay during September x 6.20% Note 2 - FICA - Medicare tax Medi care tax is always payable on gross pay Medi care tax Gross pay x 1.45% Note 3 - FUTA and SUTA taxes *Maximum salary subject to FUTA tax & SUTA tax is $7,000. Once an employee's year to date earnings exceed the wage base of $7,000, no additional FUTA tax &SUTA would be payable by employer