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.		$	5,000				$	2,100
b.			2,250					2,350
c.			122,600					8,500

1a. 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.)

a)
tax	Sept earnings subject to tax	tax rate	tax amount
FICA social security			n/a
FICA medicare			n/a
FUTA			n/a
SUTA			n/a
b)
tax	sept earnings subject to tax	tax rate	tax amount
FICA social security		n/a	n/a
FICA medicare		n/a	n/a
FUTA		n/a	n/a
SUTA		n/a	n/a
c)
tax	sept earnings subject to tax	tax rate	tax amount
FICA social security		n/a	n/a
FICA medicare		n/a	n/a
FUTA		n/a	n/a
SUTA		n/a	n/a

1b. Assuming situation (1a), 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 $90 for this pay period.

The employee’s federal income taxes withheld by the employer are $90 for this pay period. Compute the taxes to be withheld from gross pay for this employee. (Round your answers to 2 decimal places.)

	sept earnings subject to tax	tax rate	tax amount
federal income tax			$90

Options for first column under federal income tax: FICA-medicare, FICA-social security, FUTA, SU

Prepare the employers Sept 30 journal entry to record accrued salary expense and its related payroll liabilities for this employee.

Date	General Journal	Debit	Credit
Sept 30

Answer 1

1
a)
Tax	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA-Social Security	2100	6.20%	130.20
FICA-Medicare	2100	1.45%	30.45
FUTA	2000	0.60%	12.00
SUTA	2000	5.40%	108.00
b)
Tax	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA-Social Security	2350	6.20%	145.70
FICA-Medicare	2350	1.45%	34.08
FUTA	2350	0.60%	14.10
SUTA	2350	5.40%	126.90
c)
Tax	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA-Social Security	5800	6.20%	359.60
FICA-Medicare	8500	1.45%	123.25
FUTA	0	0.60%	0.00
SUTA	0	5.40%	0.00
Note: Earnings taxable for FUTA and SUTA in (a) = 7000-5000 = $2000
Note: Earnings taxable for Social Security in (c) = 128400-122600 = $5800
1b
Taxes to be Withheld From Gross Pay (Employee-Paid Taxes)
	September Earnings Subject to Tax	Tax Rate	Tax Amount
Federal income tax			90.00
FICA—Social Security	2100	6.20%	130.20
FICA—Medicare	2100	1.45%	30.45
Total taxes withheld			250.65
Date	General Journal	Debit	Credit
Sep 30	Salaries expense	2100.00
	FICA—Social Security taxes payable		130.20
	FICA—Medicare taxes payable		30.45
	Employee federal income taxes payable		90.00
	Salaries payable		1849.35