1/ An employee earns $5,750 per month working for an employer. The FICA tax rate
ID: 2586813 • Letter: 1
Question
1/ An employee earns $5,750 per month working for an employer. The FICA tax rate for Social Security is 6.2% of the first $118,500 of earnings each calendar year and the FICA tax rate for Medicare is 1.45% of all earnings. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 5.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $192 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $160 and contributes $80 to a retirement plan each month. What is the amount the employer should record as payroll taxes expense for the employee for the month of January? (Round your intermediate calculations to two decimal places.)
Multiple Choice
$784.88
$976.88
$391.00
$356.50
$667.00
2/ Springfield Company offers a bonus plan to its employees and the amount of the employee bonuses for the current year is estimated to be $962,000 to be paid during January of the following year. The journal entry on December 31 to record the bonuses is:
Multiple Choice
Debit Estimated Bonus Payable $962,000; credit Cash $962,000.
Debit Unearned Bonuses $962,000; credit Bonus Payable $962,000.
No entry since the bonuses are not paid until January.
Debit Employee Bonus Expense $962,000; credit Prepaid Employee Bonus $962,000.
Debit Employee Bonus Expense $962,000; credit Bonus Payable $962,000.
Explanation / Answer
1. Answer: $784.88
FICA-Social security = $5750 x 6.2% = $356.50
FICA-Medicare = $5750 x 1.45% = $83.38
FUTA = $5750 x 0.6% = $34.50
SUTA = $5750 x 5.4% = $310.50
Total payroll taxes expense = $356.50 + 83.38 + 34.50 + 310.50 = $784.88
2. Answer: Debit Employee Bonus Expense $962,000; credit Bonus Payable $962,000
The estimated bonus expense will be accrued in the current year by debiting the expense account and crediting the liability account since it will be paid in the following financial year.
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