Need help with the procediment. The following totals for the month of June were

Question

Need help with the procediment.

The following totals for the month of June were taken from the payroll register of Young Company:

The entry to record the accrual of employer's payroll taxes would include a debit to

Payroll Tax Expense for $1,125

Social Security and Medicare Tax Payable for $2,250

Payroll Tax Expense for $2,498

Payroll Tax Expense for $1,373 CORRECT

Salaries expense $15,000 Social security and Medicare taxes withheld 1,125 Income taxes withheld 3,000 Retirement savings 500 Salaries subject to federal and state unemployment taxes of 6.2 percent 4,000

Explanation / Answer

$1373 shown in the problem is derived from Social security and medicare tax $1125 + Unemployment tax of $248 ie., $4000*6.2%.

The above is correct only if the Social security and Medicare taxes are borne by Young Company. In the problem it is stated as Social security and Medicare taxes withheld. This signfies that the company has the practice of deducting these taxes from employee salaries similar to Income taxes withheld. In this case, it is a deduction and not a cost to Young company. Hence, the accrual of employer's payroll taxes would have only a debit for $248 towards unemployement taxes in addition to the salary expense of $ 15000

Income taxes withheld and retirement savings are deducted from employees salaries. Hence, these are not company contributions. Thus, they will not appear in the debit to Payroll ledger.

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