[ray33157]

NINJA Question –

Maybe I’m reading this wrong:

Lime Co.’s payroll for the month ending January 31, 20X1, is summarized as follows:

Total wages $10,000

Federal income tax withheld 1,200

All wages paid were subject to the Federal Insurance Contributions Act (FICA). FICA tax rates were 7.65% each for employee and employer. Lime remits payroll taxes on the 15th of the following month. In its financial statements for the month ending January 31, 20X1, what amounts should Lime report as total payroll tax liability and as payroll tax expense?

It says the correct answer is Liability: $2,730; Expense: $765

But wouldn’t the correct answer be Liability: $1,965; Expense: $765, since the employee portion of FICA is included with the withheld amounts?

A - Passed
R - Passed
B - Passed
F - Passed

[Peterman25]

Liability = 1200 +

employee = 10,000*.0765 = 765

employer = 10,000*.0765 = 765

1200+765+765 = 2730

Remember, FICA is social security tax and not federal income tax.

Expense is just the employer portion = 765.

BEC 7/14 - PASS
FAR 10/14 - PASS
AUD 1/15 - PASS
REG 4/15 - PASS

AZ license - Official 8/20/2015

[ray33157]

Thanks Peterman. I see what they did with this question. They said federal income tax withholdings not just withholdings.

A - Passed
R - Passed
B - Passed
F - Passed

[Author]

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