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. 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)