Example 4-2 To compute the tax using the percentage method, follow the steps illustrated below. Step 1 Determine the amount of gross wages earned, marital status, number of allowances, and frequency of pay. Note: If the wage ends in a fractional dollar amount, the wage may be rounded to the nearest dollar. However, in this text, exact wages are used. ➡ Wilson Goodman, single, claims two allowances and earns $915.60 semimonthly. Step 2 Multiply the number of allowances claimed by the amount of one allowance for the appropriate payroll period, as shown in the Table of Allowance Values in Figure 4.6. ➡ Table of Allowance Values for semimonthly payroll period shows $175.00. Multiply $175.00 × 2 = $350.00 Step 3 Subtract the amount for the number of allowances claimed from the employee’s gross pay to find the excess of wages over allowances claimed. ➡ Gross pay $915.60 Less: Allowances 350.00 Excess wages $565.60 Step 4 Determine the withholding tax on the excess of wages over allowances claimed by referring to the appropriate Percentage Method Withholding Table. ➡ Compute tax from Tax Table 3(a), page T-3.($565.60 – $563.00 = $2.60 × 12% = $0.31 + $40.50) = $40.81 Use the percentage method to compute the federal income taxes to withhold from the wages or salaries of each employee. If an amount is zero, enter "0". Round your calculations and final answers to the nearest cent. Click here to access the Table of Allowance Values. Click here to access the Percentage Method Tables. EmployeeNo. Employee Name MaritalStatus No. of WithholdingAllowances Gross Wageor Salary Amount to BeWithheld 1 Amoroso, A. S 1 $1,610 weekly $ 2 Finley, R. S 1 825 biweekly 3 Gluck, E. S 2 9,630 quarterly 4 Quinn, S. M 7 925 semimonthly 5 Treave, Y. M 1 2,875 monthly

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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Example 4-2

To compute the tax using the percentage method, follow the steps illustrated below.

Step 1

Determine the amount of gross wages earned, marital status, number of allowances, and frequency of pay. Note: If the wage ends in a fractional dollar amount, the wage may be rounded to the nearest dollar. However, in this text, exact wages are used.

➡

Wilson Goodman, single, claims two allowances and earns $915.60 semimonthly.

Step 2

Multiply the number of allowances claimed by the amount of one allowance for the appropriate payroll period, as shown in the Table of Allowance Values in Figure 4.6.

➡

Table of Allowance Values for semimonthly payroll period shows $175.00.

Multiply $175.00 × 2 = $350.00

Step 3

Subtract the amount for the number of allowances claimed from the employee’s gross pay to find the excess of wages over allowances claimed.

➡

Gross pay	$915.60
Less: Allowances	350.00
Excess wages	$565.60

Step 4

Determine the withholding tax on the excess of wages over allowances claimed by referring to the appropriate Percentage Method Withholding Table.

➡

Compute tax from Tax Table 3(a), page T-3.

($565.60 – $563.00 = $2.60 × 12% = $0.31 + $40.50) = $40.81

Use the percentage method to compute the federal income taxes to withhold from the wages or salaries of each employee. If an amount is zero, enter "0". Round your calculations and final answers to the nearest cent.

Click here to access the Table of Allowance Values.

Click here to access the Percentage Method Tables.

Employee No.	Employee Name	Marital Status	No. of Withholding Allowances	Gross Wage or Salary	Amount to Be Withheld
1	Amoroso, A.	S	1	$1,610	weekly	$
2	Finley, R.	S	1	825	biweekly
3	Gluck, E.	S	2	9,630	quarterly
4	Quinn, S.	M	7	925	semimonthly
5	Treave, Y.	M	1	2,875	monthly

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