Pennsylvania Company has a monthly gross payroll (paid on the last day of each month) of...

Pennsylvania Company has a monthly gross payroll (paid on the last day of each month) of $516,000, which is subject to unemployment taxes (Federal at 0.8% and State at 5.4%). All earnings are subject to 7.65% FICA tax (combined Social Security and Medicare). Federal income tax withholdings are 25%, and state income tax withholdings are 8% of total earnings.

Assuming no individual employee has reached the maximum limit for Social Security tax or for unemployment tax, which of the following is not true for the month ended January 31?

a) Pennsylvania Company will record a liability for Federal Unemployment Taxes of $4,128.

b) Pennsylvania Company will record a net payroll of $306,246.

c) Pennsylvania Company will record a liability for State Income Taxes of $41,280.

d) Pennsylvania Company will record a total liability for FICA Taxes of $39,474.

Solutions

Expert Solution

Journal entries
S.no.	Accounts title and explanations	Debit $	Credit $
a.	Salaries and wages expense	516000
	Federal Income tax payable		129000	(516000*25%)
	State Income tax payable		41280	(516000*8%)
	FICA taxes payable			39474	(516000*7.65%)
	Federal Unemployment tax payable	4128	(516000*0.80%)
	State Unemployment tax payable	27864	(516000*5.40%)
	Salaries and wages payable		274254
	(for salaries accrued)

Thus, the statement that the net payroll payable is $ 306,246 is incorrect as the correct net amount is $ 274,254

Answer is b. Pennsylvania company will record a net payroll of $306,246.

ekkarill92 answered 1 year ago

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