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 "0.8% Medicare rate"
"1)5%State unemployment tax rate"
5)4%
A) Payroll Tax Expense for $2,498
B) Social Security and Medicare Tax Payable for $2,250
C) Payroll Tax Expense for $1,373
D) Payroll Tax Expense for $1,125

Question

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 "0.8% Medicare rate"
"1)5%State unemployment tax rate"
5)4%
A) Payroll Tax Expense for $2,498 
B) Social Security and Medicare Tax Payable for $2,250 
C) Payroll Tax Expense for $1,373 
D) Payroll Tax Expense for $1,125

Quizplus · Accepted Answer

The accrual of employer's payroll taxes includes the following components:
- 6.2% Social Security tax rate on the first $142,800 of wages
- 1.45% Medicare tax rate on all wages
- 0.8% Additional Medicare tax rate on wages above $200,000
- 5% State unemployment tax rate on the first $7,000 of wages
- 0.6% Federal unemployment tax rate on the first $7,000 of wages

Based on the totals provided, the calculation for employer's payroll taxes for the month of June is as follows:

Social Security tax: $110,100 x 6.2% = $6,822
Medicare tax: $110,100 x 1.45% = $1,595.05
Additional Medicare tax: $0 (since there is no indication that any employee earned over $200,000 in wages for the month)
State unemployment tax: $7,000 x 5% = $350
Federal unemployment tax: $7,000 x 0.6% = $42

Total employer's payroll taxes: $8,809.05

Of the answer choices given:
A) Payroll Tax Expense for $2,498 - This amount is too high.
B) Social Security and Medicare Tax Payable for $2,250 - This amount only includes the Social Security and Medicare taxes, and does not account for the state and federal unemployment taxes.
C) Payroll Tax Expense for $1,373 - This amount is the closest to the calculated amount of $8,809.05 and includes all components of the employer's payroll taxes.
D) Payroll Tax Expense for $1,125 - This amount is too low.

The Following Totals for the Month of June Were Taken