FICA is the for Social Security of 12.4% and Medicare of 2.95% which will be paid half by the employer and half by the employee. However, independent contractors will pay only 6.2% for Social Security and 1.45% for Medicare to the Federal Government.a) Trueb) FICA is mandatory c) Falsed) Independent Contractors do not pay FICA During January 2021, ABC Inc. incurs employee salariesof $3,000,000. Federal income tax withholding was$450,000, State income tax was $187,500, and $30,000for the employee portion of health insurance (payable toBlue Cross). The employer portion for Health Care was$90,000.1. Record the employee salary expense, withholdingsincluding FICA (Emplyees' responsibility: SocialSecurity 6.2% and Medicare 1.45% of the grosspay), and salaries payable for January 20212. Record the employer-provided fringe benefits.3. Record the employer payroll taxes (Emplyers'responsibility: Social Security 6.2% and Medicare1.45% of the gross pay) (assuming no employeepassed the $7000 income limit on this first monthof January for FUTA 0.6% and SUTA 5.4%combined 6% of the first $7000 annual income)When ready, after preparing Journal Entries on paper,answer the following questions.

Answered: FICA is the for Social Security of…

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Question

FICA is the for Social Security of 12.4% and Medicare of 2.95% which will be paid half by the employer and half by the employee. However, independent contractors will pay only 6.2% for Social Security and 1.45% for Medicare to the Federal Government.

a) True

b) FICA is mandatory

c) False

d) Independent Contractors do not pay FICA

During January 2021, ABC Inc. incurs employee salaries
of $3,000,000. Federal income tax withholding was
$450,000, State income tax was $187,500, and $30,000
for the employee portion of health insurance (payable to
Blue Cross). The employer portion for Health Care was
$90,000.
1. Record the employee salary expense, withholdings
including FICA (Emplyees' responsibility: Social
Security 6.2% and Medicare 1.45% of the gross
pay), and salaries payable for January 2021
2. Record the employer-provided fringe benefits.
3. Record the employer payroll taxes (Emplyers'
responsibility: Social Security 6.2% and Medicare
1.45% of the gross pay) (assuming no employee
passed the $7000 income limit on this first month
of January for FUTA 0.6% and SUTA 5.4%
combined 6% of the first $7000 annual income)
When ready, after preparing Journal Entries on paper,
answer the following questions.

Expert Solution

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FICA stands for the Federal Contribution Act which is used in U.s for social security and Medicare programs. It's paid by employer and employees both.