Gatineau Truck Centre
This company has a weekly payroll of $10,000 for its employees, who work Monday through Friday. Federal and provincial income taxes are withheld in the amounts of $1,700 and $400, respectively. Employee payroll deductions are withheld at a mandatory rate of 7.65% (6.2% for Canada Pension Plan (CPP) and 1.45% for Workers Safety Insurance Board (WSIB)). In addition, the federal and provincial employment taxes are applied at rates of 2% and 5%, respectively. The company's year end is December 31.
-Refer to the figure Gatineau Truck Centre.What is the impact on the accounting equation of the journal entry for the employer's deductions and related liabilities for this payroll transaction?

Question

Quizplus · Accepted Answer

The journal entry for the employer's deductions and related liabilities for this payroll transaction will increase the liabilities (due to the amount withheld for income taxes and employee payroll deductions), and decrease shareholders' equity (due to the employer taxes). Therefore, the impact on the accounting equation will be an increase in liabilities and a decrease in shareholders' equity. Option D is the correct answer.

Gatineau Truck Centre This Company Has a Weekly Payroll of $10,000 for Its