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The summary of the payroll for the monthly pay period ending July 15 indicated the following: Salaries $180,000 Federal income tax withheld 32,300 Medical insurance
The summary of the payroll for the monthly pay period ending July 15 indicated the following:
Salaries | $180,000 |
Federal income tax withheld | 32,300 |
Medical insurance withheld | 7,370 |
Social security tax withheld | 10,800 |
Medicare tax withheld | 2,700 |
a. Illustrate the effects on the accounts and the financial statements of the payroll. Employee FICA Tax includes social security tax and medicare tax withheld.
Assets = | Liabilities + Stockholders' Equity | |||
Cash | Employee Federal Income Tax Payable | Employee Medical Insurance Payable | Employee FICA Tax Payable | Retained Earnings |
Statement of Cash Flows | Income Statement | |||||
July 15 | Operating Activities | July 15 | Wages and Salaries Expense |
b. Illustrate the effects on the accounts and the financial statements of the employer's payroll tax expense for the month. The state unemployment tax rate is 4.2%, and the federal unemployment tax rate is 0.8%. Only $30,000 of salaries are subject to unemployment taxes.
Assets = | Liabilities + Stockholders' Equity | |||
Cash | Employee FICA Tax Payable | FUTA Tax Payable | SUTA Tax Payable | Retained Earnings |
Statement of Cash Flows | Income Statement | |||||
July 15 | No Effect | July 15 | Payroll Tax Expense |
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