The following unemployment tax rate schedule is in effect for the calendar year 2021 in State A, which uses the reserve-ratio formula in determining employer contributions: Reserve Ratio Contribution Rate 0.0% or more, but less than 1.0% 1.0% or more, but less than 1.2% 1.2% or more, but less than 1.4% 1.4% or more, but less than 1.6% 1.6% or more, but less than 1.8% 1.8% or more, but less than 2.0% 2.0% or more, but less than 2.2% 2.2% or more, but less than 2.4% 2.4% or more, but less than 2.6% 2.6% or more, but less than 2.8% 2.8% or more, but less than 3.0% 3.0% or more, but less than 3.2% 3.2% or more 6.7% 6.4% 6.1% 5.8% 5.5% 5.2% 4.9% 4.6% 4.3% 4.0% 3.7% 3.4% 3.1% Hyram Company, which is located in State A, had an average annual payroll of $850,000 for the three 12-month peri- ods ending on June 30, 2020 (the computation date for the tax year 2021). As of June 30, 2020, the total contributions that had been made to Hyram Company's reserve account, in excess of the benefits charged, amounted to $17,440. Compute: a. Hyram Company's reserve ratio for 2020 b. 2021 contribution rate for the company c. Smallest contribution that the company can make in order to reduce its tax rate if State A permits voluntary contributions... d. Tax savings realized by the company, taking into consideration the voluntary contribution made in (c) if the taxable payroll in 2021 is $980,000. 70 70 2$
The following unemployment tax rate schedule is in effect for the calendar year 2021 in State A, which uses the reserve-ratio formula in determining employer contributions: Reserve Ratio Contribution Rate 0.0% or more, but less than 1.0% 1.0% or more, but less than 1.2% 1.2% or more, but less than 1.4% 1.4% or more, but less than 1.6% 1.6% or more, but less than 1.8% 1.8% or more, but less than 2.0% 2.0% or more, but less than 2.2% 2.2% or more, but less than 2.4% 2.4% or more, but less than 2.6% 2.6% or more, but less than 2.8% 2.8% or more, but less than 3.0% 3.0% or more, but less than 3.2% 3.2% or more 6.7% 6.4% 6.1% 5.8% 5.5% 5.2% 4.9% 4.6% 4.3% 4.0% 3.7% 3.4% 3.1% Hyram Company, which is located in State A, had an average annual payroll of $850,000 for the three 12-month peri- ods ending on June 30, 2020 (the computation date for the tax year 2021). As of June 30, 2020, the total contributions that had been made to Hyram Company's reserve account, in excess of the benefits charged, amounted to $17,440. Compute: a. Hyram Company's reserve ratio for 2020 b. 2021 contribution rate for the company c. Smallest contribution that the company can make in order to reduce its tax rate if State A permits voluntary contributions... d. Tax savings realized by the company, taking into consideration the voluntary contribution made in (c) if the taxable payroll in 2021 is $980,000. 70 70 2$
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:### Unemployment Tax Rate Schedule for State A in 2021
For the calendar year 2021, State A employs a reserve-ratio formula to determine employer contributions to unemployment tax. Below is the tax rate schedule based on various reserve ratios.
| Reserve Ratio Interval | Contribution Rate |
|------------------------|-------------------|
| 0.0% or more, but less than 1.0% ............... | 6.7% |
| 1.0% or more, but less than 1.2% ............... | 6.4% |
| 1.2% or more, but less than 1.4% ............... | 6.1% |
| 1.4% or more, but less than 1.6% ............... | 5.8% |
| 1.6% or more, but less than 1.8% ............... | 5.5% |
| 1.8% or more, but less than 2.0% ............... | 5.2% |
| 2.0% or more, but less than 2.2% ............... | 4.9% |
| 2.2% or more, but less than 2.4% ............... | 4.6% |
| 2.4% or more, but less than 2.6% ............... | 4.3% |
| 2.6% or more, but less than 2.8% ............... | 4.0% |
| 2.8% or more, but less than 3.0% ............... | 3.7% |
| 3.0% or more, but less than 3.2% ............... | 3.4% |
| 3.2% or more ............................................ | 3.1% |
### Example Scenario and Application
Hyram Company, situated in State A, reported an average annual payroll of $850,000 for the three 12-month periods ending on June 30, 2020. The total contributions made to Hyram Company’s reserve account by June 30, 2020, amounted to $17,440, exceeding the benefits charged.
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