Question

At the end of each month, a company pays its employees. Payroll information below is for January, the first month of the fiscal year. Assume that none of the employees exceeds the Federal unemployment tax maximum salary of $7,000 in January. Salaries $ 1,000,000 Federal and state income taxes withheld 170,000 Federal unemployment tax rate 0.80 % State unemployment tax rate (after FUTA deduction) 5.40 % Social Security (FICA) tax rate 7.65 %

Required:
Record salaries expense and payroll tax expense for the January pay period.

Answer 1

January 31, 202x, wages expense

Dr Wages expense 1,000,000

Cr Federal income taxes withheld payable 170,000

Cr FICA taxes withheld payable 76,500

Cr Cash 246,500

Taxes are generally paid the next month, that is why they are recorded as payable. This applies to both withheld taxes and payroll taxes.

January 31, 202x, payroll expense

Dr FICA taxes expense 76,500

Dr FUTA taxes expense 8,000

Dr SUTA taxes expense 54,000

Cr FICA taxes payable 76,500

Cr FUTA taxes payable 8,000

Cr SUTA taxes payable 54,000