Mid-West Tutoring Had the Following Payroll Information on January 31

question 77

Multiple Choice

Mid-West Tutoring had the following payroll information on January 31:
$$\begin{array} { | c | c | c | } \hline \text { Employee } & \text { Gross Pay } & \begin{array} { c } \text { Cumulative Earnings } \\\text { Prior to this Payroll }\end{array} \\\hline \text { R Baxter } & \$ 6,000 & \$ 6,000 \\\hline\end{array}$$
Assume:
FICA tax rates are: OASDI 6.2% on a limit of $117,000 and Medicare 1.45%.
State Unemployment tax rate is 2% on the first $7,000.
Federal Unemployment tax rate is 0.8% on the first $7,000.
Using the information above,the journal entry to record the employee's withholding taxes would include:

• A)a debit to Payroll Tax Expense in the amount of $6,000.
• B)a debit to Wages and Salaries Expense in the amount of $6,000.
• C)a credit to Cash in the amount of $6,000.
• D)a credit to FUTA Payable for $48.

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Definitions:

Bad Debts Expense

Expenses linked to accounts receivable that a firm anticipates will not be collected.

Allowance Method

An accounting technique used to account for bad debts, which estimates uncollectible accounts receivable and creates a provision for them.

Accounts Receivable

Financial dues from customers to an organization for products or services that have been dispensed but not reimbursed.

Allowance for Doubtful Accounts

A contra asset account used to estimate the portion of a company's receivables that may not be collectible.