Question

Cowboy Company's sales employees earn a total of $41,000 per month and are 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 14% and monthly medical insurance premiums of $2,200 for the employees. The employer payroll taxes for Cowboy Company include FICA taxes, federal unemployment taxes of 0.6% of the first $7,000 paid each employee, and state unemployment taxes of 5.4% of the first $7,000 paid to each employee. Prepare the journal entry to record the employer’s payroll taxes at January 31 for Cowboy Company. (Assume that none of the employees have reached the unemployment limit of $7,000.)

Answer 1

Account Titles	Debit	Credit
Payroll Tax Expense	$     5,596.50
FICA TAxes Payable		$     2,542.00
Medicare Tax Payable		$        594.50
Federal Unemployment Tax Payable		$        246.00
State Unemployment Tax Payable		$     2,214.00