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Recording Payroll Taxes According to a summary of the payroll of Kirby Co., $180,000 in earnings...

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


Solutions

Expert Solution

a. Calculate the employer's payroll taxes, using the following rates: state unemployment, 4.3%; federal unemployment, 0.8%.
Earnings x Rate Tax payable
FICA 180000 7.50% $                         13,500
SUTA 60000 4.30% $                           2,580
FUTA 60000 0.80% $                               480
B. Financial statements effect
Balance Sheet
Assets = Liabilities + Stockholders' Equity
FICA Tax Payable + FUTA Tax Payable + SUTA Tax Payable + Retained Earnings
                     13,500 +                              480 +                          2,580 +             (16,560)
Statement of cash flows Income Statement
No effect Payroll Tax expense                     (16,560)

ekkarill92 answered 1 year ago
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