The initial $42 FUTA tax deposit that Farrugia was obligated to make.
The Federal Unemployment Tax Act is referred to as FUTA. This law's objective is to tax employers who provide wages to their workers so that they may use the money to help the unemployed.
Use a 0.6% Net FUTA tax rate on the first $7,000 in taxable wages, as stated in the question.
Actually, this is in line with the law, which states that only the first $7,000 of each employer's taxable payroll distribution is taken into account for calculating FUTA.
And here Taxable Payrolls given are -
1st Quarter - $38,400
2nd Quarter - $29,600
3rd Quarter - $16,500
4th Quarter - $8,900
Since the taxable payroll reported in each quarter is greater than $7,000, only the fraction of these payrolls up to $7,000 will be considered to determine FUTA.
Amount of the first deposit in accordance with FUTA
= $7,000 x 0.6% (rate given in question)
= $42
Complete question:
Use the net FUTA tax rate of 0.6% on the first $7,000 of taxable wages. Faruga Company had FUTA taxable payrolls for the four quarters of $38,400; $29,600; $16,500; and $8,900, respectively. What was the amount of Faruga's first required deposit of FUTA taxes?
To learn more about FUTA taxes
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