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.When the company journal entry is recorded for the payment of these wages and related liabilities,which of the following statements is true regarding the impact on the accounting equation?

Question

Quizplus · Accepted Answer

When the company records the payment of these wages and related liabilities, the asset Cash will decrease. The liabilities Federal Income Tax Payable, State Income Tax Payable, FICA Taxes Payable, Federal Unemployment Taxes Payable, and State Unemployment Taxes Payable will increase. There will be no impact on stockholders' equity. Therefore, the impact on the accounting equation will be a decrease in assets and stockholders' equity, and an increase in liabilities.

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