Question

Question: Tavella Company’s first weekly pay period of the year ends on January 8. On that date, the column totals in Tavella’s payroll register indicate its sales employees earned \(34,745, its office employees earned \)21,225, and its delivery employees earned \(1,030 in salaries. The employees are to have withheld from their salaries FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, \)8,625 of federal income taxes, \(1,160 of medical insurance deductions, and \)138 of union dues. No employee earned more than \(7,000 in the first pay period.

Required

1. Calculate FICA Social Security taxes payable and FICA Medicare taxes payable. Prepare the journal entry to record Tavella Company’s January 8 (employee) payroll expenses and liabilities. (Round amounts to cents.)

2. Prepare the journal entry to record Tavella’s (employer) payroll taxes resulting from the January 8 payroll. Tavella’s merit rating reduces its state unemployment tax rate to 3.4% of the first \)7,000 paid each employee. The federal unemployment tax rate is 0.6%. (Round amounts to cents.)

Short answer

Answer

1. The FICA social security scheme payable is$3,534, and the FICA Medicare taxes payable is $826.50.
2. The payroll tax payable is$6,640.50.

Step-by-step solution

Meaning of Gross Pay

Gross pay refers to the amount an employee earns before paying any taxes; it includes salaries, wages, commissions, bonuses, etc.

Gross pay refers to the amount an employee earns before paying any taxes; it includes salaries, wages, commissions, bonuses, etc.

FICA Social Security taxes

$$\begin{gathered} \mathit{S}\mathit{o}\mathit{c}\mathit{i}\mathit{a}\mathit{l}\mathbf{ }\mathbf{ }\mathit{S}\mathit{e}\mathit{c}\mathit{u}\mathit{r}\mathit{i}\mathit{t}\mathit{y}\mathbf{ }\mathit{T}\mathit{a}\mathit{x}\mathit{e}\mathit{s}\mathbf{ }\mathbf{=}\mathbf{ }\mathit{T}\mathit{o}\mathit{t}\mathit{a}\mathit{l}\mathit{S}\mathit{a}\mathit{l}\mathit{a}\mathit{r}\mathit{i}\mathit{e}\mathit{s}\mathbf{ }\mathbf{\times }\mathbf{ }\mathit{T}\mathit{a}\mathit{x}\mathbf{ }\mathbf{ }\mathit{r}\mathit{a}\mathit{t}\mathit{e} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{ }\mathbf{\$}\mathbf{57}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{ }\mathbf{6}\mathbf{.}\mathbf{2}\mathbf{\%} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{3}\mathbf{,}\mathbf{534} \end{gathered}$$

FICA Medicare taxes

$$\begin{gathered} \mathit{M}\mathit{e}\mathit{d}\mathit{i}\mathit{c}\mathit{a}\mathit{r}\mathit{e}\mathbf{}\mathbf{ }\mathit{T}\mathit{a}\mathit{x}\mathit{e}\mathit{s}\mathbf{ }\mathbf{=}\mathbf{ }\mathit{T}\mathit{o}\mathit{t}\mathit{a}\mathit{l}\mathit{S}\mathit{a}\mathit{l}\mathit{a}\mathit{r}\mathit{i}\mathit{e}\mathit{s}\mathbf{ }\mathbf{\times }\mathbf{ }\mathit{T}\mathit{a}\mathit{x}\mathbf{ }\mathbf{ }\mathit{r}\mathit{a}\mathit{t}\mathit{e} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{ }\mathbf{\$}\mathbf{57}\mathbf{,}\mathbf{000}\mathbf{\times }\mathbf{1}\mathbf{.}\mathbf{45}\mathbf{\%} \\ \mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{}\mathbf{=}\mathbf{\$}\mathbf{826}\mathbf{,}\mathbf{50} \end{gathered}$$

Journal entry to record payroll expenses and liabilities

Date	Particulars	Debit ($)	Credit ($)
Jan 8	Office Salaries Expense	34,745
	Sales Salaries Expense	21,225
	Delivery salaries expense	1,030
	FICA Social Security Tax Payable		3,534
	FICA Medicare Taxes Payable		826.50
	Federal Income Taxes Payable		8,625
	Employee Medical Insurance Payable		1,160
	Employees Union Dues Payable		138
	Salaries Payable		42,716.50
	(To record the payroll expenses and liabilities)

 Step 3: Journal entry for payroll expense

Date	Particulars	Debit ($)	Credit ($)
Jan. 8	Payroll Taxes Expense	6,640.50
	FICA Social Security Tax Payable		3,534
	FICA Medicare Taxes Payable		826.50
	State Unemployment Tax Payable		1,938
	Federal Unemployment Tax Payable		342
	(To record payroll expenses)