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Subject Topic: FICA taxes (Topic Closed Topic Closed) Post ReplyPost New Topic
  
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ysjd.patel
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Posted: 16 Mar 2009 at 01:16 | IP Logged  

Lime Co.'s payroll for the month ended January 31, 1995, is summarized as follows:
Total wages $10,000
Federal income tax withheld 1,200
All wages paid were subject to FICA. FICA tax rates were 7% each for employee and employer. Lime remits payroll taxes on the 15th of the following month. In its financial statements for the month ended January 31, 1995, what amounts should Lime report as total payroll tax liability and as payroll tax expense?

      
       Liability     Expense
Ans: $2,600      $700

Journal entry
Dr. Wage expense 10,000
Dr. Employer FICA tax expense 700
Cr. FIT withheld 1,200
Cr.FICA tax withheld (employee portion) 700
Cr. Employer FICA tax liability 700
Cr. Accrued payroll liability 8,100

Can anyone explain me why they have credited Employer FICA tax liability of 700?
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sanju06
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Posted: 16 Mar 2009 at 03:00 | IP Logged  

Employer's FICA tax is 7%*10,000=$700.

This is an expense for the employer which he need to remit by the 15th of the next month. So for the month end , it is still a liability/payable and hence is credited.

hope it helps.

 

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ysjd.patel
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Posted: 16 Mar 2009 at 09:22 | IP Logged  

thanx sanju06...:)
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