Dan Jones and Pat Smith are the only two employees of Lone Star Company. In January 2014, Dan's gross pay was $4 400 and Pat's gross pay was $5 200. All earnings are subject to income tax of 30% from the first dollar earned. Which of the following would be included in the entry to record the salary expense for January?

Question

Quizplus · Accepted Answer

The entry to record the salary expense for January would include a credit to income tax payable for $2,880. This is because the company is required to withhold income taxes from its employees' paychecks. The amount of income tax withheld is calculated by multiplying the employee's gross pay by the applicable tax rate. In this case, the applicable tax rate is 30%.

Dan Jones and Pat Smith Are the Only Two Employees