Art Parrish, the Sole Employee of Parrish Sales, Has Gross

question 3

Essay

Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is under the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of 18%. His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. Please provide the fifth journal entry in the payroll cycle to record the payment by the company of payroll taxes to the government.

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Definitions:

Variable Costs

Expenses that vary directly with changes in production or sales volumes, such as raw materials and direct labor costs.

Production Increases

A rise in the amount of goods and services produced over a given period of time by a business or economy.

High-low Method

A technique used in accounting and finance to estimate the variable and fixed components of a company's costs based on the highest and lowest levels of activity.

Total Fixed Costs

The sum of all expenses that remain constant regardless of the level of production or business activity.