Colonial Company has completed the payroll for January 2010, reflecting the following data:

Salaries and wages earned ..... $86,000

Employee income taxes withheld .... 10,000

FICA payroll taxes* .......... 6,000

*Assessed on both employer and employee (i.e., $6,000 each).

Required:

1. What amount of additional labor expense to the company was due to tax laws? What was the amount of the employees’ take-home pay?

2. List the liabilities and their amounts that are reported on the company’s January 31, 2010, balance sheet, assuming the employees have been paid.

3. Would employers react differently to a 10 percent increase in the employer’s share of FICA than to a 10 percent increase in the basic level of salaries? Would financial analysts react differently?