Question

Recording Payroll Taxes

According to a summary of the payroll of Kirby Co., $180,000 in earnings were subject to the 7.5% FICA tax. Also, $60,000 in earnings were subject to state and federal unemployment taxes.

a. Calculate the employer's payroll taxes, using the following rates: state unemployment, 4.3%; federal unemployment, 0.8%.

$

b. Illustrate the effects on the accounts and financial statements of recording the accrual of payroll taxes. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.

Statement of Cash Flows

Balance Sheet

Income Statement

Assets

=

Liabilities

+

Stockholders' Equity

No effect

+

No effect

=

FICA tax payable

+

SUTA payable

+

FUTA payable

+

Retained earnings

Statement of Cash Flows

Income Statement

No effect

Payroll tax expense

Answer 1

a)

Earnings were subject Unemployment Tax	60,000
Earnings were subject to FICA Tax	180,000
FICA Tax (180000*7.5%)	13,500
SUTA Tax (60000*4.3%)	2,580
FUTA Tax((60000*0.8%)	480

Assets	No Effect
Liabilities:
FUTA Payable	Increase	480
SUTA Pyable	Increase	2,580
FICA Payable	Increase	13,500
Stock Holder's Equity	No Effect
Statement of cash flow Statement	No Effect
Income Statement	Increase	16,560

Please note that the Equation Format given in the question is not clear. So I have mentioned Item wise the Effect in above table. You can take the values from the table and fill your assignment.

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