Question

BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $128,400 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 5.4% of the first $7,000 paid to its employee.

	Gross Pay through August 31					Gross Pay for September
a.		$	5,900				$	1,400
b.			2,700					2,800
c.			123,500					9,400

Compute BMX’s amounts for each of these four taxes as applied to the employee’s gross earnings for September under each of three separate situations (a), (b), and (c). (Round your answers to 2 decimal places.)

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.
Assuming situation (a), prepare the employer’s September 30 journal entries to record the employer’s payroll taxes expense and its related liabilities.

Answer 1

a)
Employer Payroll taxes	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA-Social Security	$ 1,400	6.20%	$ 86.80
FICA-Medicare	$ 1,400	1.45%	$ 20.30
FUTA	$ 1,100 ($7,000 (-) $ 5,900)	0.60%	$ 6.60
SUTA	$ 1,100 ($7,000 (-) $ 5,900)	5.40%	$ 59.40
b)
Tax	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA-Social Security	2,800	6.20%	173.6
FICA-Medicare	2,800	1.45%	40.6
FUTA	2,800	0.60%	16.8
SUTA	2,800	5.40%	151.2
c)
Tax	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA-Social Security	$ 4,900 ($ 128,400 (-) $ 123,500)	6.20%	$ 303.80
FICA-Medicare	$ 9,400	1.45%	$ 136.30
FUTA	$ 0	0.60%	0
SUTA	$ 0	5.40%	0

Taxes to be Withheld From Gross Pay (Employee-Paid Taxes)
	September Earnings Subject to Tax	Tax Rate	Tax Amount
Federal income tax			$ 90 (This amount not provided in question assuming it as 90 )Please check the question and Proceed
FICA - Social Security	$ 1,400	6.20%	$ 86.80
FICA - Medicare	$ 1,400	1.45%	$ 20.30
Date	General Journal	Debit	Credit
Sep-30	Salaries expense	$ 1,400
	Employee Fed. income taxes payable		$ 90
	FICA - Social Security taxes payable		$ 86.80
	FICA - Medicare taxes payable		$ 20.30
	Salaries payable    - Plug.		$ 1,202.90
	(To record the aacued Salary expense)

Employer Payroll taxes	September Earnings Subject to Tax	Tax Rate	Tax Amount
FICA-Social Security	$ 1,400	6.20%	$ 86.80
FICA-Medicare	$ 1,400	1.45%	$ 20.30
FUTA	$ 1,100 ($7,000 (-) $ 5,900)	0.60%	$ 6.60
SUTA	$ 1,100 ($7,000 (-) $ 5,900)	5.40%	$ 59.40
	Total Taxes withheld		$ 173.10
Date	General Journal	Debit	Credit
Sep-30	Payroll taxes expense	$ 173.10
	FICA - Social Security taxes payable		$ 86.80
	FICA - Medicare taxes payable		$ 20.30
	Federal unemployment taxes payable		$ 6.60
	State unemployment taxes payable		$ 59.40
	(To record the employer's Payroll taxes expense )