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BMX Company has one employee
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 through August | Gross Pay for September | |
| a. | $ 6,400 | $ 800 |
| b. | $ 18,200 | $ 2,100 |
| c. | $ 112,200 | $ 8,000 |
Compute BMX’s amounts for each of these four taxes as applied to the employee’s gross earnings for September under each of three separate situations (a), (b), and (c). (Round your answers to 2 decimal places.)
a.)
| Tax | September Earnings Subject to Tax | Tax Rate | Tax Amount |
| FICA-Social Security | |||
| FICA-Medicare | |||
| FUTA | |||
| SUTA |
b.)
| Tax | September Earnings Subject to Tax | Tax Rate | Tax Amount |
| FICA-Social Security | |||
| FICA-Medicare | |||
| FUTA | |||
| SUTA |
c.)
| Tax | September Earnings Subject to Tax | Tax Rate | Tax Amount |
| FICA-Social Security | |||
| FICA-Medicare | |||
| FUTA | |||
| SUTA |
d.) Assuming situation a, prepare the employer’s September 30 journal entries to record salary expense and its related payroll liabilities for this employee. The employee’s federal income taxes withheld by the employer are $80 for this pay period. (Round your answers to 2 decimal places.)
Taxes to be Withheld From Gross Pay (Employee-Paid Taxes)
| September Earnings Subject to Tax | Tax Rate | Tax Amount | |
| Federal income tax | |||
| ------------------------- | ---------------------------------------------- | ----------- | Total: |
e. Prepare the employer's September 30 journal entry to record accrued salary expense and its related payroll liabilities for this employee.
| DATE | GENERAL JOURNAL | DEBIT | CREDIT |
| Sep 30 | |||
f.) 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.)
| Employer Payroll Taxes | September earnings subject to tax | Tax Rate | Tax Amount |
| ------------------------------ | --------------------------------------------- | ----------- | Total: |
g.)
| DATE | GENERAL JOURNAL | DEBIT | CREDIT |
| Sep 30 |
Expert Solution
Answer:
| a | |||
| Tax | September Earnings Subject to Tax | Tax Rate | Tax Amount |
| FICA-Social Security | 800 | 6.20% | 49.6 |
| FICA-Medicare | 800 | 1.45% | 11.6 |
| FUTA | 600 | 0.60% | 3.6 |
| SUTA | 600 | 2.90% | 17.4 |
| b | |||
| Tax | September Earnings Subject to Tax | Tax Rate | Tax Amount |
| FICA-Social Security | 2,100.00 | 6.20% | 130.2 |
| FICA-Medicare | 2,100.00 | 1.45% | 30.45 |
| FUTA | 0 | 0.60% | 0 |
| SUTA | 0 | 2.90% | 0 |
| c) | |||
| Tax | September Earnings Subject to Tax | Tax Rate | Tax Amount |
| FICA-Social Security | 6,300.00 | 6.20% | 390.6 |
| FICA-Medicare | 8,000.00 | 1.45% | 116 |
| FUTA | 0 | 0.60% | 0 |
| SUTA | 0 | 2.90% | 0 |
| d | |||
| Taxes to be Withheld From Gross Pay (Employee-Paid Taxes) | |||
| September Earnings Subject to Tax | Tax Rate | Tax Amount | |
| Federal income tax | 80 | ||
| FICA—Social Security | 800 | 6.20% | 49.6 |
| FICA—Medicare | 800 | 1.45% | 11.6 |
| Total taxes withheld | 141.2 | ||
| e | |||
| Date | General Journal | Debit | Credit |
| Sep-30 | Salaries expense | 800 | |
| FICA—Social Security taxes payable | 49.6 | ||
| FICA—Medicare taxes payable | 11.6 | ||
| Employee federal income taxes payable | 80 | ||
| Salaries payable | 658.8 | ||
| f | |||
| Employer Payroll taxes | September earnings subject to tax | Tax Rate | Tax Amount |
| FICA-Social Security | 800 | 6.20% | 49.6 |
| FICA-Medicare | 800 | 1.45% | 11.6 |
| FUTA | 600 | 0.60% | 3.6 |
| SUTA | 600 | 2.90% | 17.4 |
| Total Payroll Taxes Expense | 82.2 | ||
| g | |||
| Date | General Journal | Debit | Credit |
| Sep. 30 | Payroll taxes expense | 82.2 | |
| FICA—Social security taxes payable | 49.6 | ||
| FICA—Medicare taxes payable | 11.6 | ||
| Federal unemployment taxes payable | 3.6 | ||
| State unemployment taxes payable | 17.4 | ||
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