Keith,an employee of Sunbeam,Inc.,has gross salary for May of $15,000.The entire amount is under the OASDI limit of $118,500 and thus subject to FICA.He is also subject to federal income tax at a rate of 20%.Which of the following is a part of the journal entry to record the disbursement of his net pay? (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)(Round the final answer to the nearest dollar.)
A) debit to Cash for $10,852.50
B) credit to Cash for $10,852.50
C) debit to Employee Income Tax Payable of $10,852.50
D) debit to FICA Tax Payable of $10,852.50

Question

Quizplus · Accepted Answer

To calculate Keith's net pay, first, calculate the FICA taxes: OASDI is 6.2% of $15,000 = $930, and Medicare is 1.45% of $15,000 = $217.50. The total FICA tax is $930 + $217.50 = $1,147.50. The federal income tax is 20% of $15,000 = $3,000. The total deductions are $1,147.50 (FICA) + $3,000 (federal income tax) = $4,147.50. Keith's net pay is $15,000 - $4,147.50 = $10,852.50. The journal entry to record the disbursement of his net pay includes a credit to Cash for the net amount paid to him.

Keith,an Employee of Sunbeam,Inc