Crane incurs a weekly payroll of $251000 that includes federal taxes withheld of $38200, FICA taxes withheld of $23970, and 401 (k) withholdings of $27300. What is the effect on assets and liabilities from recording this transaction? (Ignore company payroll taxes).

First let us define the nature of each of the following as per Balance sheet of a company:

Payroll payable - Liability

FICA taxes withheld - Liability

Federal taxes - Liability

410 (k) - Liability

Explanation:

Effect of Transaction on assets and liabilities:

Payroll expense Debit will have no impact Payroll payable, Federal taxes, FICA and 401 (k) will increase the current liability. And when they are subsequently paid, cash will be credited hence decreasing the current assets and all these current liabilities shall be debited, hence decreasing the current liability portion.