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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

ARC Co. owes the following amounts for payroll taxes and employees’ withholding of Social Security, Medicare, and federal income tax as of April 15:

Social Security Tax Payable $6,750.00
Medicare Tax Payable 1,575.00
FUTA Tax Payable 360.00
SUTA Tax Payable 2,646.00
Employee Federal Income Tax Payable 4,095.00

 Prepare the journal entries for:

  1. (a) Deposit of the employees’ federal income taxes and the Social Security and Medicare taxes on April 15.
  2. (b) Deposits of the FUTA and SUTA taxes on April 30.

To determine

Prepare journal entry to record the given transactions.

Explanation

Payroll tax:

Payroll tax refers to the tax that are equally contributed by employees and employer based on the salary and wages of an employee. Payroll tax includes taxes like federal tax, local income tax, state tax, social security tax and federal and state unemployment tax.

Prepare journal entry to record the deposit of the employees’ federal income taxes and the Social Security and Medicare taxes on April 15.

DateAccount Title and explanationPost. refDebit ($)Credit ($)
April 15FICA-Social Security taxes payable 6,750.00 
 FICA-Medicare Taxes payable 1,575.00 
 Employee federal income tax payable 4,095.00 
     Cash  12,420.00
 (To record the employer payroll taxes for the week ended April 15.)   

Table (1)

  • FICA tax – social and security tax payable is a liability and there is a decrease in the value of liability. Hence, debit the FICA tax – social and security tax payable by $6,750.00.
  • FICA tax – medical tax payable is a liability and there is a decrease in the value of liability. Hence, debit the FICA tax – medical tax payable by $1,575.00.
  • Employee federal income tax payable is a liability and it is decreased. Hence, debit employee federal income tax payable by $4,095.00.
  • Cash is an asset and there is a decrease in the value of an asset...

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