Answer and Explanation:
The journal entries are shown below:
a)Salaries and Wages Expense $2,760,000
To Withholding Taxes Payable $675,000
To FICA Taxes Payable $181,380*
To Cash $1,903,620
(Being the salaries and wages expense is recorded)
The computation for the FICA tax payable is
= {(Total payroll - excess amount) × FICA tax rate] + (Excess amount × excess rate)
= [($2,760,000 – $480,000) × 7.65%] + ($480,000 × 1.45%)
= $181,380
For recording this we debited the salaries and wages expense as it increased the expenses and at the same time it also increased the liabilities so withholding tax payable and FICA tax payable is credited and since cash is paid which results in reduction of assets
(b) Payroll Tax Expense $193,380
To FICA Taxes Payable $181,380
To FUTA Taxes Payable
[($2,760,000 – $2,160,000) × 0.8%] $4,800
To SUTA Taxes Payable ($600,000 × 1.2%) $7,200
(Being the payroll tax expense is recorded)
For recording this we debited the payroll tax expense as it increased the expenses and at the same time it also increased the liabilities so FUTA tax payable, FICA tax payable , and SUTA tax payable is credited
