Question

Metro Express has 5 sales employees, whom earn a total of $25,000 per month and is paid on the last working day of the month. Each employee’s wages are subject to FICA Social Security taxes of 6.2% and Medicare taxes of 1.45% on all wages. Withholding for each employee also includes federal income tax of 16% and monthly medical insurance premiums of $700 for the employees.

The employer payroll taxes for Metro Express include FICA taxes, federal unemployment taxes of 0.8% of the first $7,000 paid each employee, and state unemployment taxes of 4.0% of the first $7,000 paid to each employee. Prepare the journal entry to record the employer’s payroll taxes at January 31 for Metro Express. (Assume that none of the employees have reached the unemployment limit of $7,000.)

Answer 1

Journal

Jan. 31	Payroll tax expense	2,248.5
	FICA -Social security tax payable		1,550
	FICA - Medicare tax payable		362.5
	Federal Unemployment Taxes Payable		56
	State Unemployment Taxes Payable		280

FICA -Social security tax payable = Salaries x FICA -Social security tax rate

= 25,000 x 6.2%

= $1,550

FICA - Medicare tax payable = Salaries x FICA - Medicare tax rate

= 25,000 x 1.45%

= $362.5

Federal Unemployment Taxes Payable = Tax base salaries x Federal Unemployment Taxes rate

= 7,000 x 0.8%

= $56

State Unemployment Taxes Payable = Tax base salaries x State Unemployment Taxes rate

= 7,000 x 4%

= $280