A company has three employees. Total salaries for the month of March were $8,000
ID: 2411816 • Letter: A
Question
A company has three employees. Total salaries for the month of March were $8,000. The federal income tax rate for all employees is 15%. The FICA—Social Security tax rate is 6.2% and the FICA—Medicare tax rate is 1.45%.
A. Calculate the amount of employee taxes withheld
B. Prepare the company's journal entry to record the March payroll assuming these were the only deductions.
C. Prepare the April 1 journal entry to record the cash payment of salaries.
D. Include a brief description/explanation for the journal entries
E. Provide an explanation of the next steps the company should complete to finish the payroll process for March. Since March is the end of the first quarter for the company, in your explanation, include the form the company should prepare and file with the IRS at the end of March (Hint: Employers are required to prepare and submit certain payroll reports and forms)
Explanation / Answer
Answer- A:
Gross Pay
8000
Federal Income Tax Deduction (8000 * 15%)
1200
FICA- Social Security Tax Deduction (8000 * 6.2%)
496
FICA- Medicare Tax Deduction (8000* 1.45%)
116
Answer- B:
Date
Account Title and Explanation
Debit
Credit
Mar. 31
Salaries Expense
8000
Employee Federal income Tax Payable
1200
FICA- Social Security Tax Payable
496
FICA- Medicare Tax Payable
116
Salaries Payable
6188
(To record the payroll of march)
Answer- C:
Date
Account Title and Explanation
Debit
Credit
Apr-01
Salaries Payable
6188
Cash
6188
(To record the payment of salaries for the month of March
Answer- D:
Date
Account Title and Explanation
Debit
Credit
Apr-01
Employee Federal income Tax Payable
1200
FICA- Social Security Tax Payable
496
FICA- Medicare Tax Payable
116
Cash
1812
(To record the remittance of payroll withholdings)
Gross Pay
8000
Federal Income Tax Deduction (8000 * 15%)
1200
FICA- Social Security Tax Deduction (8000 * 6.2%)
496
FICA- Medicare Tax Deduction (8000* 1.45%)
116
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