Gainesville Truck Center
This company has a weekly payroll of $10,000 for its employees who work Monday through Friday. Federal and state income taxes are withheld in the amounts of $1,700 and $400, respectively, and FICA taxes are withheld at a mandatory rate of 7.65% (6.2% for Social Security and 1.45% for Medicare). In addition, the federal and state unemployment taxes are applied at rates of 2% and 5%, respectively. The company's year-end is December 31.
-Refer to Gainesville Truck Center. Which of the following statements is true regarding the entry to record wages and the related liabilities?

Question

Quizplus · Accepted Answer

The total amount of federal and state income taxes withheld is $2,100 ($1,700 + $400). The FICA taxes withheld for Social Security and Medicare are calculated by multiplying the total wages by the respective percentages (6.2% and 1.45%) resulting in a total of $765 ($6,500 x 0.062) for Social Security and $94.25 ($6,500 x 0.0145) for Medicare. The total amount of federal and state unemployment taxes is calculated by multiplying the total wages by the respective rates (2% and 5%) for a total of $350 ($6,500 x 0.07). Therefore, the total liabilities for wages and related taxes is $3,259.25. Since the question is asking about the entry to record the wages and related liabilities, it is important to note that the total wages paid is $10,000 and the amount of liabilities is $3,259.25. Therefore, the entry would be:

Wages Expense    $10,000
  Social Security Tax Payable            $765
  Medicare Tax Payable                     $94.25
  Federal Income Tax Payable             $2,100
  State Income Tax Payable                 $400
  Federal Unemployment Tax Payable    $130
  State Unemployment Tax Payable        $220
------------------------------------
Total Liabilities                              $3,259.25

Since Social Security Tax Payable is a liability account, it will be credited, not debited. Therefore, the correct answer is B. The other options are incorrect because they either have the wrong account or the wrong amount.

Gainesville Truck Center This Company Has a Weekly Payroll of $10,000 for Its