Question

BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $127,200 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 3.1% and SUTA taxes are 2.9% of the first $7,000 paid to its employee.

	Gross Pay through August 31					Gross Pay for September
a.		$	6,400				$	800
b.			2,000					2,100
c.			120,900					8,000

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.

Answer 1

Taxes to be withheld from gross Pay (Employee – Paid Taxes)
	September earnings subject to tax (a)	Tax rate (b)	Tax Amount (a x b)
Federal Income tax			$80.00
FICA – Social Security tax	$800.00	6.20%	$49.60
FICA – Medicare tax	$800.00	1.45%	$11.60
Total taxes withheld			$141.20

.

Journal entry to record salaries expense and its related payroll liabilities
Date	General Journal	Debit	Credit
Sept. 30	Salaries Expense	$800.00
	Employee Federal Income tax Payable		$80.00
	FICA - Social Security taxes Payable		$49.60
	FICA - Medicare taxes Payable		$11.60
	Salaries Payable               [Gross Salary – Deductions = $800 - $80 - $49.60 - $11.60]		$658.80
	(To record accrued salaries and related payroll liabilities)