Art Panache, the sole employee of Panache Sales, has gross salary for March of $5,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. He is also subject to federal income tax at a rate of 20%. His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. The journal entry in the payroll cycle to record the employer's payroll tax expense includes a credit to FICA-OASDI Taxes Payable for $310. (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

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Quizplus · Accepted Answer

The FICA-OASDI tax is calculated as 6.2% of gross salary, which in this case is $310. The FICA-Medicare tax is calculated as 1.45% of gross salary, which in this case is $72.50. Therefore, the total payroll tax expense for the employer is $382.50, which is credited to FICA-OASDI Taxes Payable.

Art Panache, the Sole Employee of Panache Sales, Has Gross