Required information Use the following information for the Exercises below. The
ID: 2407665 • Letter: R
Question
Required information Use the following information for the Exercises below. The following information applies to the questions displayed below BMX Company has one employee. FICA Social Security taxes are 6.2% of the first $118,500 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 2.9% of the first $7,000 paid to its employee. Gross Pay for September 1,70e 4,000 9,900 Gross Pay through August a. $ 6,400 20,100 c. 114,100 b. Exercise 11-7 Payroll-related journal entries LO P3 Assuming situation a, prepare the employer's September 30 journal entries to record the employer's payroll taxes expense and its related liabilities. (Round your answers to 2 decimal places.)Explanation / Answer
Situation a:
Social security = September pay × 6.2% rate [since the limit $118,500 is not crossed]
= $1,700 × 6.2%
= $105.4
Medicare = September pay × 1.45% rate
= $1,700 × 1.45%
= $24.65
FUTA and SUTA should be calculated on the rest of the amount of $7,000, since the gross pay has already reached to $6,400 in August; rest of the amount would be ($7,000 - $6,400 =) $600.
FUTA = Rest of the amount × 0.6% rate
= $600 × 0.6%
= $3.6
SUTA = Rest of the amount × 0.6% rate
= $600 × 2.9%
= $17.4
Journal
Date
Accounts title and explanation
P.ref
Debit, $
Credit, $
30/09
Payroll taxes expense
151.05
Social security tax payable
105.4
Medicare tax payable
24.65
FUTA tax payable
3.6
SUTA tax payable
17.4
To record employer’s payroll related taxes expense.
Situation b:
Social security = September pay × 6.2% rate [since the limit $118,500 is not yet crossed]
= $4,000 × 6.2%
= $248
Medicare = September pay × 1.45% rate
= $4,000 × 1.45%
= $58
There would be no liabilities regarding FUTA and SUTA, since the maximum limit of pay $7,000 is already crossed through August.
Journal
Date
Accounts title and explanation
P.ref
Debit, $
Credit, $
30/09
Payroll taxes expense
306
Social security tax payable
248
Medicare tax payable
58
FUTA tax payable
0
SUTA tax payable
0
To record employer’s payroll related taxes expense.
Situation c:
The social security liability would be on the rest of the amount of $118,500, since the liability is limited up to that extent; ($118,500 - $114,100 = $4,400).
Social security = September pay (limited) × 6.2% rate
= $4,400 × 6.2%
= $272.80
Medicare = September pay × 1.45% rate
= $9,900 × 1.45%
= $143.55
There would be no liabilities regarding FUTA and SUTA, since the maximum limit of pay $7,000 is already crossed through August.
Journal
Date
Accounts title and explanation
P.ref
Debit, $
Credit, $
30/09
Payroll taxes expense
416.35
Social security tax payable
272.80
Medicare tax payable
143.55
FUTA tax payable
0
SUTA tax payable
0
To record employer’s payroll related taxes expense.
Date
Accounts title and explanation
P.ref
Debit, $
Credit, $
30/09
Payroll taxes expense
151.05
Social security tax payable
105.4
Medicare tax payable
24.65
FUTA tax payable
3.6
SUTA tax payable
17.4
To record employer’s payroll related taxes expense.
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