Great Lakes Tutoring had the following payroll information on February 28: Assume:
FICA tax rates are: OASDI 6.2% on a limit of $106,800 and Medicare 1.45%
State Unemployment tax rate is 2% on the first $7,000
Federal Unemployment tax rate is 0.8% on the first $7,000
Using the information above, the journal entry to record the payroll tax expense for Great Lakes Tutoring would include:
A)a debit to Payroll Tax Expense in the amount of $390.
B)a credit to FUTA Payable for $24.
C)a credit to SUTA Payable for $60.
D)All of the above are correct.

Question

Great Lakes Tutoring had the following payroll information on February 28:  Assume:
FICA tax rates are: OASDI 6.2% on a limit of $106,800 and Medicare 1.45%
State Unemployment tax rate is 2% on the first $7,000
Federal Unemployment tax rate is 0.8% on the first $7,000
Using the information above, the journal entry to record the payroll tax expense for Great Lakes Tutoring would include:
A)a debit to Payroll Tax Expense in the amount of $390. 
B)a credit to FUTA Payable for $24. 
C)a credit to SUTA Payable for $60. 
D)All of the above are correct.

Quizplus · Accepted Answer

To record payroll tax expense, we need to take into account both employee and employer taxes. Therefore, we need to credit FUTA Payable and SUTA Payable for the employer taxes and debit Payroll Tax Expense for the total amount of taxes.

The calculation for each tax is as follows:

OASDI tax = 6.2% on $106,800 limit = $6,621.60
Medicare tax = 1.45% on total payroll = $1,811.50
SUTA tax = 2% on $7,000 limit = $140
FUTA tax = 0.8% on $7,000 limit = $56

Total payroll tax expense = $6,621.60 + $1,811.50 + $140 + $56 = $8,629.10

Therefore, the correct answer is D) All of the above are correct.

Great Lakes Tutoring Had the Following Payroll Information on February