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 $6,400 $1,700
B 2,950 3,050
C 124,000 9,900

Compute BMX's amounts for each of these four taxes as applied to the employee's gross earnings for September under each of three separate situations (a), (b) and (c).

Answer 1

Answer and Explanation:

a)

Tax September Earnings Subject to Tax Tax Rate Tax Amount

FICA-Social Security 1700 6.20% 105.40

FICA-Medicare 1700 1.45% 24.65

FUTA 600 0.60% 3.60

SUTA 600 5.40% 32.40

b)

Tax September Earnings Subject to Tax Tax Rate Tax Amount

FICA-Social Security 3050 6.20% 189.10

FICA-Medicare 3050 1.45% 44.23

FUTA 3050 0.60% 18.30

SUTA 3050 5.40% 164.70

c)

Tax September Earnings Subject to Tax Tax Rate Tax Amount

FICA-Social Security 4400 6.20% 272.80

FICA-Medicare 9900 1.45% 143.55

FUTA 0 0.60% 0.00

SUTA 0 5.40% 0.00

Earnings taxable for FUTA and SUTA in (a) = $7,000-$6,400 = $600

Earnings taxable for Social Security in (c) = $128,400-$124,000 = $4400

2.

Taxes to be Withheld From Gross Pay (Employee-Paid Taxes)

September Earnings Subject to Tax Tax Rate Tax Amount

Federal income tax 60.00

FICA—Social Security 1700 6.20% 105.40

FICA—Medicare 1700 1.45% 24.65

Total taxes withheld 190.05

Journal

Debit Credit

Sep 30

Dr Salaries expense 1700.00

Cr FICA—Social Security taxes payable 105.40

Cr FICA—Medicare taxes payable 24.65

Cr Employee federal income taxes payable 60.00

Cr Salaries payable 1509.95

3

Employer Payroll taxes September earnings subject to tax Tax Rate Tax Amount

FICA-Social Security 1700 6.20% 105.40

FICA-Medicare 1700 1.45% 24.65

FUTA 600 0.60% 3.60

SUTA 600 5.40% 32.40

Total Payroll Taxes Expense 166.05

Date General Journal Debit Credit

Sep. 30

Dr Payroll taxes expense 166.05

Cr FICA—Social security taxes payable 105.40

Cr FICA—Medicare taxes payable 24.65

Cr Federal unemployment taxes payable 3.60

Cr State unemployment taxes payable 32.40

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