When Payroll Tax Expense is debited, which of the following accounts are typically credited?

• A. FICA Taxes Payable
• B. Cash
• C. Federal Unemployment Taxes Payable (FUTA)
• D. Salaries and Wages Expense

Answer: (C)

Verified step by step guidance

1. Understand the concept of Payroll Tax Expense: Payroll Tax Expense represents the employer's obligation to pay taxes related to employee wages, including Social Security (FICA), Medicare, and unemployment taxes (FUTA). These expenses are recorded as liabilities until they are paid.
2. Identify the accounts typically credited when Payroll Tax Expense is debited: When Payroll Tax Expense is recorded, the corresponding liabilities are credited to reflect the employer's obligation to pay these taxes in the future.
3. Analyze the specific accounts involved: FICA Taxes Payable is credited to account for Social Security and Medicare taxes owed by the employer. Federal Unemployment Taxes Payable (FUTA) is credited to account for unemployment taxes owed by the employer.
4. Consider the role of Cash: If the employer pays the taxes immediately, the Cash account is credited to reflect the reduction in cash. However, if the taxes are not paid immediately, the liability accounts (e.g., FICA Taxes Payable, FUTA Payable) are credited instead.
5. Exclude unrelated accounts: Salaries and Wages Expense is not credited in this transaction because it represents the gross wages earned by employees, not the employer's tax obligations. Focus only on the liability accounts and Cash as appropriate.