Question

On January 8, the end of the first weekly pay period of the year, Regis Company's payroll register showed that its employees earned $23,760 of office salaries and $60,840 of sales salaries. Withholdings from the employees' salaries include FICA Social Security taxes at the rate of 6.20%, FICA Medicare taxes at the rate of 1.45%, $13,360 of federal income taxes, $1,320 of medical insurance deductions, and $940 of union dues. No employee earned more than $7,000 in this first period.
Required:

a. Calculate below the amounts for each of these four taxes of Regis Company. Regis's merit rating reduces its state unemployment tax rate to 4% of the first $7,000 paid to each employee. The federal unemployment tax rate is 0.60%.
b. Prepare the journal entry to record Regis Company's January 8 (employee) payroll expenses and liabilities.
c. Prepare the journal entry to record Regis?s (employer) payroll taxes resulting from the January 8 payroll. Regis?s merit rating reduces its state unemployment tax rate to 4% of the first $7,000 paid each employee. The federal unemployment tax rate is 0.60%.

Answer 1

Answer and Explanation:

a. The calculation of taxes is shown below:-

FICA social securities = ($23,760 + $60,840) × 0.062

= $84,600 × 0.062

= $5,245.2

FICA Medicare = ($23,760 + $60,840) × 0.0145

= $84,600 × 0.0145

= $1,226.7

Federal unemployment tax = ($23,760 + $60,840) × 0.006

= $84,600 × 0.006

= $507.60

State unemployment tax = ($23,760 + $60,840) × 0.04

= $84,600 × 0.04

= $3,384

b. The Journal entry to record the payroll expenses and liabilities is shown below:-

Salaries and wage expenses Dr, $84,600

($23,760 + $60,840)

    To Salaries and wage payable $62,508.10

    To FICA social securities taxes payable $5,245.2

    To FICA Medicare taxes payable $1,226.7

    To Federal income taxes payable $13,360

    To Employee medical insurance payable $1,320

     To Employee union dues payable $940

(Being payroll expenses and liabilities is recorded)

c. The Journal Entry is shown below:-

Payroll tax expense Dr, $10,363.5

    To FICA social securities taxes payable $5,245.2

    To FICA Medicare taxes payable $1,226.7

    To Federal unemployment tax payable $507.60

    To State unemployment tax payable $3,384

(Being the payroll taxes and follows state unemployment and federal unemployment tax is recorded)