Steve,an employee of Panache Inc.,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 employer's payroll tax expense includes a credit to FICA-Medicare Taxes Payable for $145.(Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45 %.)

Question

Quizplus · Accepted Answer

The credit to FICA-Medicare Taxes Payable should be $72.50, not $145. The FICA-Medicare Tax rate is 1.45%, so $5,000 * 1.45% = $72.50.

Steve,an Employee of Panache Inc