Question

BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $118,500 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 2.9% of the first $7,000 paid to its employee.

	Gross Pay through August					Gross Pay for September
a.		$	6,500				$	1,900
b.			20,200					4,100
c.			114,200					10,000

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. (Round your answers to 2 decimal places.)

prepare the employer's September 30 journal entry to record the accrued salary expense and its related payroll liabilities for this employee.

Answer 1

	a)
	Tax				September earnings subject to tax	Tax rate	Tax amount
					a	b	a*b
	FICA-Social security				1900	6.20%	117.8
	FICA-Medicare				1900	1.45%	27.55
	FUTA				500	0.60%	3
					(7000-6500)
	SUTA				500	2.90%	14.5
					(7000-6500)
	Journal entries:
	Date	General journal				Debit	Credit
	Sep 30.	Salaries expense				1900
		Social security taxes payable					117.8
		Medicare taxes payable					27.55
		Federal income tax withholdings payable					80
		Salaries payable					1674.65
		(To record salary expenses)
	Sep 30.	Payroll tax expense
		Social security taxes payable					117.8
		Medicare taxes payable					27.55
		FUTA payable					3
		SUTA payable					14.5
		(To record payroll liabilities)