Dan Jones and Pat Smith are the only two employees of Lone Star Company. In January, 2009, Dan's gross pay was $4,400 and Pat's gross pay was $5,200. All earnings are subject to FICA taxes of 8%.
Which of the following would be included in the entry to record the payroll taxes imposed on Lone Star Company for January?
A) A debit to FICA tax payable for $768
B) A credit to FICA tax payable for $768
C) A credit to Salary expense for $8,832
D) A debit to Salary payable to employees $9,600

Question

Quizplus · Accepted Answer

The FICA taxes imposed on Lone Star Company would be calculated based on the total gross pay of both employees ($4,400 + $5,200 = $9,600) multiplied by the FICA tax rate of 8% ($9,600 * 0.08 = $768). This amount represents the employer's contribution to FICA taxes and would be credited to FICA tax payable, indicating a liability for the company.

Dan Jones and Pat Smith Are the Only Two Employees