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Business
Accounting
1. Suppose a company can hire either one (1) upper-level supervisor for P50,000 or two (2) middle staff or rank and file employees for P25,000 each (basic salary). Both will be given cash to purchase a motor vehicle with the monetary value of P40,000 for one (1) supervisor or P20,000 for each of the rank and file employees. Which among the alternatives should the company choose? Justify your answer by showing your solution. Basic Salary Taxable Fringe Benefits Fringe Benefit Tax Expense: (P50,000/.65) x 35% Phil-Health - Employer Share SSS Contributions - Employer Share Pag-IBIG - Employer Share Total Expenses 50,000 50,000 50,000 50,000 26,923 900 1,500 1,630 3,260 100 200 P129,553 P104,960 The employer saves around P24,593 payroll expenses, including fringe benefit taxes and other benefits, by using two (2) senior rank and file staff instead of one supervisor. The savings is about 25% of payroll costs of two (2) rank and file employees. Over several employees, this could result in considerable employment tax savings.

1. Suppose a company can hire either one (1) upper-level supervisor for P50,000 or two (2) middle staff or rank and file employees for P25,000 each (basic salary). Both will be given cash to purchase a motor vehicle with the monetary value of P40,000 for one (1) supervisor or P20,000 for each of the rank and file employees. Which among the alternatives should the company choose? Justify your answer by showing your solution. Basic Salary Taxable Fringe Benefits Fringe Benefit Tax Expense: (P50,000/.65) x 35% Phil-Health - Employer Share SSS Contributions - Employer Share Pag-IBIG - Employer Share Total Expenses 50,000 50,000 50,000 50,000 26,923 900 1,500 1,630 3,260 100 200 P129,553 P104,960 The employer saves around P24,593 payroll expenses, including fringe benefit taxes and other benefits, by using two (2) senior rank and file staff instead of one supervisor. The savings is about 25% of payroll costs of two (2) rank and file employees. Over several employees, this could result in considerable employment tax savings.

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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explain thoroughly why there is no fringe benefit tax expense for the two middle staff or rank and file employees

1. Suppose a company can hire either one (1) upper-level supervisor for P50,000 or two (2) middle staff or rank and file employees for P25,000 each (basic salary). Both will be given cash to purchase a motor vehicle with the monetary value of P40,000 for one (1) supervisor or P20,000 for each of the rank and file employees. Which among the alternatives should the company choose? Justify your answer by showing your solution. Basic Salary Taxable Fringe Benefits Fringe Benefit Tax Expense: (P50,000/.65) x 35% Phil-Health - Employer Share SSS Contributions - Employer Share Pag-IBIG - Employer Share Total Expenses 50,000 50,000 50,000 50,000 26,923 900 1,500 1,630 3,260 100 200 P129,553 P104,960 The employer saves around P24,593 payroll expenses, including fringe benefit taxes and other benefits, by using two (2) senior rank and file staff instead of one supervisor. The savings is about 25% of payroll costs of two (2) rank and file employees. Over several employees, this could result in considerable employment tax savings.
Transcribed Image Text:1. Suppose a company can hire either one (1) upper-level supervisor for P50,000 or two (2) middle staff or rank and file employees for P25,000 each (basic salary). Both will be given cash to purchase a motor vehicle with the monetary value of P40,000 for one (1) supervisor or P20,000 for each of the rank and file employees. Which among the alternatives should the company choose? Justify your answer by showing your solution. Basic Salary Taxable Fringe Benefits Fringe Benefit Tax Expense: (P50,000/.65) x 35% Phil-Health - Employer Share SSS Contributions - Employer Share Pag-IBIG - Employer Share Total Expenses 50,000 50,000 50,000 50,000 26,923 900 1,500 1,630 3,260 100 200 P129,553 P104,960 The employer saves around P24,593 payroll expenses, including fringe benefit taxes and other benefits, by using two (2) senior rank and file staff instead of one supervisor. The savings is about 25% of payroll costs of two (2) rank and file employees. Over several employees, this could result in considerable employment tax savings.
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