Indicate how each event affects the elements of the financial statements. Use the following letters to record your answer in the box shown below each element. You do not need to enter amounts. Increase = IDecrease = DNo Effect = NA(Note that "No Effect" means that the event either does not affect the element of the financial statements or that the event causes an increase in that element and is offset by a decrease in that same element.) Charles Company recognized payroll tax expense for the employer portion of FICA tax and federal and state unemployment taxes.AssetsLiabilitiesStk. EquityRevenuesExpensesNetStmt. of ?IncomeCash Flows???????
What will be an ideal response?
(NA) (I) (D) (NA) (I) (D) (NA)
Recognizing the employer portion of employment taxes increases liabilities (FICA tax payable and unemployment tax payable) and decreases stockholders' equity (retained earnings). It increases expense (payroll tax expense), which decreases net income. It does not affect the statement of cash flows until the taxes are paid.
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