The company prepares, but does not yet pay, its first payroll of the new year. S
ID: 2421818 • Letter: T
Question
The company prepares, but does not yet pay, its first payroll of the new year. Salaries total $10,000 and 7.65% is withheld from paychecks for FICA tax. Ignore all other payroll deductions. The journal entries will be debit wage expense $10,000 and credit wages payable 10,000; debit payroll tax expense for $1,530 and credit FICA tax payable $1,530 debit wage expense $10,000 and debit payroll tax expense $765; credit wages payable $9,235 and credit FICA tax payable $1,530 debit wage expense $10,000 and credit wages payable $10,000; debit payroll tax expense for $765 and credit FICA tax payable $765 debit wage expense $10,000; credit wages payable $8,470 and FICA tax payable $1,530Explanation / Answer
Here option B is correct as total wages are $10,000 out of which FICA tax with hold of employees is 7.65% so it will be $765 and the equal amount is also paid by the company so it will be a payroll expense for compaby and total tax payable by the company will be $765 (employee) + $765 (employer) = $1,530
So entry will be
Wages expense $10,000
Payroll expense $765
Wages expense payable $9,235
FICA tax payable $1,530