Recording Payroll Taxes

According to a summary of the payroll of Kirby Co., $180,000 in earnings were subject to the 7.5% FICA tax. Also, $60,000 in earnings were subject to state and federal unemployment taxes.

a. Calculate the employer's payroll taxes, using the following rates: state unemployment, 4.3%; federal unemployment, 0.8%.

$

b. Illustrate the effects on the accounts and financial statements of recording the accrual of payroll taxes. If no account or activity is affected, select "No effect" from the dropdown list and leave the corresponding number entry box blank. Enter account decreases and cash outflows as negative amounts.

Statement of Cash Flows

Balance Sheet

Income Statement

Assets

=

Liabilities

+

Stockholders' Equity

No effect

+

No effect

=

FICA tax payable

+

SUTA payable

+

FUTA payable

+

Retained earnings

Statement of Cash Flows

Income Statement

No effect

Payroll tax expense