Which of the following journal entries correctly records the employer's payroll taxes expense and related liabilities for September 30, assuming the following payroll taxes apply: FICA Social Security, FICA Medicare, Federal Unemployment Tax (FUTA), and State Unemployment Tax (SUTA)?

• A. Debit Salaries Expense; Credit Cash and Payroll Taxes Expense.
• B. Debit Payroll Taxes Expense; Credit FICA Taxes Payable, FUTA Taxes Payable, and SUTA Taxes Payable.
• C. Debit Payroll Taxes Payable; Credit Payroll Taxes Expense.
• D. Debit Payroll Taxes Expense; Credit Salaries Payable and Cash.

Answer: (B)

Verified step by step guidance

1. Step 1: Understand the components of payroll taxes. Payroll taxes include FICA Social Security, FICA Medicare, Federal Unemployment Tax (FUTA), and State Unemployment Tax (SUTA). These taxes are liabilities for the employer and must be recorded as such.
2. Step 2: Identify the correct accounts to use. The employer's payroll taxes expense is recorded as 'Payroll Taxes Expense,' and the related liabilities are recorded as 'FICA Taxes Payable,' 'FUTA Taxes Payable,' and 'SUTA Taxes Payable.'
3. Step 3: Determine the correct journal entry format. The employer incurs an expense for payroll taxes, which is debited to 'Payroll Taxes Expense.' The liabilities associated with these taxes are credited to their respective payable accounts: 'FICA Taxes Payable,' 'FUTA Taxes Payable,' and 'SUTA Taxes Payable.'
4. Step 4: Exclude incorrect options. For example, 'Debit Salaries Expense; Credit Cash and Payroll Taxes Expense' is incorrect because salaries expense pertains to employee wages, not employer payroll taxes. Similarly, 'Debit Payroll Taxes Payable; Credit Payroll Taxes Expense' reverses the correct relationship between expense and liability accounts.
5. Step 5: Finalize the correct journal entry. The correct entry is: Debit 'Payroll Taxes Expense' and Credit 'FICA Taxes Payable,' 'FUTA Taxes Payable,' and 'SUTA Taxes Payable,' as this properly records the employer's payroll taxes expense and related liabilities.