Question

Lambert Corporation has an employee salary expense of $100,000 on May 31. FICA contributions are 7.65%, and FUTA contributions are 6.2%. The journal entry for payroll tax expense will include which of the following entries?

a. Debit Payroll Tax Expense $13,750; Credit Cash $86,250
b. Debit Payroll Tax Expense $7,650; Credit Cash $92,350
c. Debit Payroll Tax Expense $6,200; Credit Cash $93,800
d. Debit Payroll Tax Expense $100,000; Credit Cash $100,000

Answer 1

The correct entry for the journal entry for payroll tax expense will be option a. Debit Payroll Tax Expense $13,750; Credit Cash $86,250.

Step-by-step explanation:

The correct entry for the journal entry for payroll tax expense will be option a. Debit Payroll Tax Expense $13,750; Credit Cash $86,250.

To calculate the payroll tax expense, we need to find the amount of FICA and FUTA contributions. The FICA contribution is calculated by multiplying the salary expense by 7.65% and the FUTA contribution is calculated by multiplying the salary expense by 6.2%.

So, the FICA contribution is $100,000 * 0.0765 = $7,650 and the FUTA contribution is $100,000 * 0.062 = $6,200. Adding these two contributions gives us a total payroll tax expense of $7,650 + $6,200 = $13,850.

To record the expense, we debit Payroll Tax Expense for $13,750 and credit Cash for $86,250.