Merger Co. has 10 employees, each of whom earns $2,300 per month and has been employed since January 1. FICA Social Security taxes are 6.2% of the first $128,400 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first $7,000 paid to each employee.

The total payroll tax expenses is   $3139.5

See the prepared journal in the explanation below.

Explanation:

Before it is presented on a general journal, the calculation is done below;

1. Payroll tax expenses:

FICA Social Security taxes = 6.2% * 2300 * 10

                                             = 0.062 * 2300 * 10

                                            = $1,426

FICA Medicare taxes  =  1.45% * 2300 * 10

                                    = 0.0145 * 2300 * 10

                                    = $333.5

FUTA taxes  =  0.6% * 2300 * 10

                      = 0.006 * 2300 * 10

                    =$138

SUTA taxes = 5.4% * 2300 * 10

                    = 0.054 * 2300 *10

                    = $1242

Total payroll tax expenses = $1,426 + $333.5 + $138 + $1242

                                             = $3139.5

Date         General Journal                             Debit            Credit

Jan. 31      Payroll tax expense                       $3139.5              

                FICA- Social sec. taxes payable                         $1,426

                FICA- Medicare taxes payable                           $333.5

                FUTA taxes payable                                            $138

                SUTA taxes payable                                           $1242

            (Payroll tax expense recognized)  

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