Question

Use the following information for the Exercises below.

[The following information applies to the questions displayed below.]

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.		$	6,700				$	400
b.			3,100					2,400
c.			119,300					8,300

Exercise 9-7 Payroll-related journal entries LO P3

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

Complete this question by entering your answers in the tabs below.

• Employer Payroll Taxes
• General Journal

Assuming situation a, calculate the employer’s payroll taxes expense. (Round your answers to 2 decimal places.)

	Employer Payroll taxes September earnings subject to tax Tax Rate Tax Amount FICA—Social Security FICA—Medicare $0.00

Please provide an explanation as to how you got the answer.

Answer 1

Employer Payroll taxes	September earnings subject to tax	Tax Rate	Tax Amount
FICA-Social Security	400	6.20%	24.80
FICA-Medicare	400	1.45%	5.80
FUTA	300	3.10%	9.30
SUTA	300	2.90%	8.70
Total Payroll Taxes Expense			48.60
Date	General Journal	Debit	Credit
Sep. 30	Payroll taxes expense	48.60
	FICA—Social security taxes payable		24.80
	FICA—Medicare taxes payable		5.80
	Federal unemployment taxes payable		9.30
	State unemployment taxes payable		8.70
Notes:
Earnings taxable for FUTA and SUTA in (a) = 7000-6700 = $300
All of earnings are taxable for FICA taxes as gross earnings is less than $127200
The taxable earnings can be multiplied by tax rates to get tax amount