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. $ 5,100 $2,200
b. 2,300 2,400
c. 122,700 8,600
Required:
1. 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 $90 for this pay period. (Round your answers to 2 decimal places.)

Answer 1

Answer:

a.

Date: 30 September

Debit: Salary Expense $2,200

Credit: Cash $1,827.70

Credit: Federal Income Tax Withheld payable $90

Credit: FICA Social Security Tax Payable $136.40

Credit: FICA Medicare Tax Payable $31.90

Credit: FUTA tax payable $11.40

Credit: SUTA tax payable $102.60

To record salary expense for September.

b.

Date: 30 September

Debit: Salary Expense $2,400

Credit: Cash $1,988.40

Credit: Federal Income Tax Withheld payable $90

Credit: FICA Social Security Tax Payable $148.80

Credit: FICA Medicare Tax Payable $34.80

Credit: FUTA tax payable $13.80

Credit: SUTA tax payable $124.20

To record salary expense for September.

c.

Date: 30 September

Debit: Salary Expense $8,600

Credit: Cash $8,031.90

Credit: Federal Income Tax Withheld payable $90

Credit: FICA Social Security Tax Payable $353.40

Credit: FICA Medicare Tax Payable $124.70

To record salary expense for September.

Explanation:

a.

FICA Social Security Tax Payable:

Gross Pay for September x FICA SS tax rate

$2,200 x 6.2% = $136.40

FICA Medicare Tax Payable:

Gross Pay for September x FICA SS tax rate

$2,200 x 1.45% = $31.90

FUTA tax payable:

($7,000 - $5,100) x 0.6% = $11.40

SUTA tax payable:

($7,000 - $5,100) x 5.4% = $102.60  

b.

FICA Social Security Tax Payable:

Gross Pay for September x FICA SS tax rate

$2,400 x 6.2% = $148.80

FICA Medicare Tax Payable:

Gross Pay for September x FICA SS tax rate

$2,400 x 1.45% = $34.80

FUTA tax payable:

$2,300 x 0.6% = $13.80

SUTA tax payable:

$2,300 x 5.4% = $124.20

Note: FUTA and SUTA tax payable will be calculated on full amount as have not reached the threshold of $7,000.

c.

FICA Social Security Tax Payable:

Gross Pay for September x FICA SS tax rate

($128,400 - $122,700) x 6.2% = $353.40

FICA Medicare Tax Payable:

Gross Pay for September x FICA SS tax rate

$8,600 x 1.45% = $124.70