Question

The following totals for the month of April were taken from the payroll register of Magnum Company:

Salaries $10,000
FICA taxes withheld $750
Income taxes withheld $2,000
Medical insurance deductions $450
Unemployment taxes $420
The entry to record accrual of employer's payroll taxes would include a
a. debit to Payroll Tax Expense for $1,170
b. debit to FICA Taxes Payable for $1,500
c. credit to Payroll Tax Expense for $420
d. debit to Payroll Tax Expense for $1,620

Answer 1

The entry to record accrual of employer's payroll taxes for Magnum Company should include a debit to Payroll Tax Expense for $1,170. This is the sum of the employer's share of FICA taxes and unemployment taxes.

Step-by-step explanation:

The question involves the recording of accrual of employer's payroll taxes in the books of Magnum Company. Employers are responsible for paying their portion of payroll taxes in addition to the employee's withholdings. Given the figures provided, we need to include the employer's share of FICA taxes (which is the same amount withheld from the employees: $750), and the unemployment taxes of $420. When we accrue the employer's portion of payroll taxes, we debit Payroll Tax Expense (for FICA and unemployment taxes) and credit the corresponding liabilities accounts. The correct debit to Payroll Tax Expense would therefore be $750 (employer's share of FICA) + $420 (unemployment taxes) = $1,170, as employer's contribution to medical insurance is usually considered a benefit expense rather than a tax expense.