A Basic Payroll Problem

In the first week of January, Tony works 52 hours at Sal's Pizza Parlor. Tony earns $15 per hour, with time-and-a-half for hours worked in excess of 40 per week. (This means that his hourly rate is 1.5 times his regular rate for all hours worked this week beyond 40.) Tony is the only employee at Sal's Pizza Parlor.

The deductions from Tony's pay include:

a. Federal Income Tax Withholding of $110. (The withholding would be calculated using Publication 15 Circular E.)

b. Social Security Tax of 6% of Tony's pay. Social Security is computed based on the first $100,000 that Tony earns this year.

c. Tony pays Medicare Tax on all wages earned at the rate of 1.5%.

d. Tony has one voluntary deduction--he contributes $25 per week to United Way.

REQUIRED

1. Prepare the journal entry that Sal would make to record Tony's earnings for the first week in January.

2. Prepare the payroll tax entry for Sal's Pizza, assuming the following:

a. Sal's Pizza Parlor is required to match Tony's contributions to Social Security and Medicare.

b. Sal's Pizza Parlor is required to contribute to State Unemployment. The rate is 5.4% of the employee's earnings, to a maximum of $7,000 earned by the employee.

c. Sal's Pizza Parlor is required to contribute to Federal Unemployment. The rate is .8% (which means .008) of the employee's earnings, to a maximum of $7,000 earned by the employee.

3. What is the total amount that will be contributed to Tony's social security and medicare accounts?

4. What is the total cost incurred by Sal's Pizza with respect to this employee?