$\begin{array}{lr}
\text { Salaries } & \$ 12,000 \
\text { FICA taxes withheld } & 900 \
\text { Income taxes withheld } & 2,500 \
\text { Medical insurance deductions } & 450 \
\text { Federal unemployment taxes } & 32\
\text { State unemployment taxes }&216\
\end{array}$
-The entry to record accrual of employer's payroll taxes would include a
A)debit to Payroll Tax Expense for $248
B)debit to FICA Taxes Payable for $1,800
C)credit to Payroll Tax Expense for $248
D)debit to Payroll Tax Expense for $1,148

Question

Quizplus · Accepted Answer

The accrual of employer's payroll taxes includes both FICA taxes (Social Security and Medicare taxes) and unemployment taxes. The FICA taxes comprise 7.65% of the employee's salary (6.2% for Social Security and 1.45% for Medicare), which is matched by the employer. Since the employee's FICA taxes withheld are given as $900, the employer's FICA taxes payable would also be $900. Therefore, option A is incorrect.

The federal unemployment tax rate is 6% on the first $7,000 of each employee's wages, but the employer can take a credit of up to 5.4% for state unemployment taxes paid. Here, the federal unemployment taxes amounted to $32, which represents 0.8% of the employee's wages. Therefore, the employee's wages would be approximately $4,000, which is less than $7,000. Hence, the employer's federal unemployment taxes payable would also be $32, and this is a relatively small amount compared to the other payroll taxes. Therefore, option B can also be ruled out.

The state unemployment tax rate varies by state and industry, and it is based on a percentage of the employee's wages up to a certain limit. Here, the state unemployment taxes amounted to $216, but we do not have any information on the state unemployment tax rate or the employee's wages. Nonetheless, we know that the employer's state unemployment taxes payable would also be $216. However, this amount is not included in the given answer choices. Therefore, we can eliminate option C.

The only option remaining is option D, which suggests recording a debit to Payroll Tax Expense for $1,148. This amount is the sum of the employer's FICA taxes payable ($900), federal unemployment taxes payable ($32), and an estimated state unemployment taxes payable ($216), as given in the question. Therefore, option D is the best choice.

-The Entry to Record Accrual of Employer's Payroll Taxes Would