Payroll Tax Expense $6,135.00 Diego’s Mexican Restaurant incurred salaries expen

Question

Payroll Tax Expense $6,135.00

Diego’s Mexican Restaurant incurred salaries expense of $70,000 for 2016. The payroll expense includes employer FICA tax, in addition to state unemployment tax and federal unemployment tax. Of the total salaries, $13,000 is subject to unemployment tax. Also, the company provides the following benefits for employees: health insurance (cost to the company, $2,700), life insurance (cost to the company, $380), and retirement benefits (cost to the company, 10% of salaries expense). Journalize Diego’s expenses for employee benefits and for payroll taxes. Explanations are not required.

Explanation / Answer

Journal Entry

Working

Payroll Tax Expense = 6135

Breakup of Payroll Tax Expense

FICA tax = (6.2%+1.45%)*70000 = $ 5355

SUTA = 0.6%*13000 = 78

FUTA = 5.4%*13000 = $ 702

FICA Tax deducted for employee is equal to Employer contribution = $5355

Account Title & Explaination Debit credit Salary Expenses 70000 FICA Tax Payable 5355 Health Insurance deduction 2700 Life Insurance deduction 380 Retirement benefits deduction 7000 Cash 54565 Payroll Tax Expenses 6135 FICA Tax Payable 5355 FUTA Payable 78 SUTA Payable 702

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