Ravello Company’s first weekly pay period of the year ends on January 8. On that date, the column totals in Ravello’s payroll register indicate its sales employees earned $20,160, its office employees earned $70,840, and its delivery employees earned $3,000. The employees are to have withheld from their wages FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the rate of 1.45%, $12,760 of federal income taxes, $1,350 of medical insurance deductions, and $820 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 Ravello Company’s January 8 (employee) payroll expenses and liabilities.
2. Prepare the journal entry to record Ravello’s (employer) payroll taxes resulting from the January 8 payroll. Ravello’s merit rating reduces its state unemployment tax rate to 2% of the first $7,000 paid each employee. The federal unemployment tax rate is 0.8%.