Question
In: Accounting
1. Company X has an employee who is paid weekly. For Company X the FUTA tax...
1. Company X has an employee who is paid weekly. For Company X the FUTA
tax rate is 6%. The limit for FUTA is $7000 of employee annual earning subject to the applicable tax.
The employee earns $1000 for the week and has cumulative earnings year to date through the previous week of
$6500. How much is deducted from the employee’s weekly paycheck for FUTA?
A. -60-
B. 30
C. 600
D. 300
E. None of the above
2. For the journal entry-- Dr. Accounts Payable 400; Cr. Cash 400--, what is the correct analysis of the journal entry?
|
A. Accounts Payable, Asset, Increases; Cash, Asset Decreases |
||
|
B. Accounts Payable, Liability, Increases; Cash, Asset Decreases |
||
|
C. Accounts Payable, Liability, Decreases; Cash, Asset Decreases |
||
|
D. Accounts Payable, Liability, Decreases; Cash, Asset Increases |
||
|
E. None of the above |
Solutions
Expert Solution
1.
FUTA tax is paid by employer only. It is not deducted from the paycheck of employees.
Hence, employee is not liable for FUTA tax.
Correct option is (E)
2.
Given transaction
Debit --- Accounts payable 400
Credit --- Cash 400
In the given transaction both accounts payable (A liability) and cash (an asset) are decreasing.
The correct analysis of the journal entry is Accounts Payable, Liability, Decreases; Cash, Asset Decreases.
Correct option is (c)
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