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Concept explainers
1.
Payroll: The total payment that a company is required to pay to its employee for the services received is called as payroll.
Payroll withholding deduction: The amounts which the employer withheld from employees’ gross pay to deduct taxes such as federal income tax, state income tax, local income tax, and social security tax are called payroll withholding deduction.
Employer payroll taxes: The taxes which the employer must pay to the employees with their salaries is called employer payroll taxes. Such taxes are not withheld from employees’ gross earnings but instead they are paid by employer.
To calculate: The amount that would be reported for the year on each employee’s wage and tax statement for 2015.
1.
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Answer to Problem 11.3BPR
Calculate the amount that would be reported for the year on each employee’s wage and tax statement for 2015.
Employee | Gross Earnings | Federal Income Tax Withheld | Social Security Tax Withheld | Medicare Tax Withheld |
Mr. A | $44,880(1) | $9,372(2) | $2,692.80(3) | $673.20(4) |
Mr. K | $25,200(5) | $3,731(6) | $1,512.00(7) | $378.00(8) |
Mr. Mc | $67,410(9) | $12,999(10) | $4,044.60(11) | $1,011.15(12) |
Mr. Mo | $55,200(13) | $9,396(14) | $3,312.00(15) | $828.00(16) |
Mr. S | $4,500(17) | $758(18) | $270.00(19) | $67.50(20) |
Mr. T | $4,875(21) | $669(22) | $292.50(23) | $73.13(24) |
Mr. W | $84,000(25) | $18,872(26) | $5,040.00(27) | $1,260.00(28) |
Explanation of Solution
Working notes:
Calculate gross earnings for Mr. A.
Gross earnings=Monthly salary×Number of months=$8,160×5.5=$44,880 (1)
Calculate federal income tax withheld for Mr. A.
Federal income tax withheld=Monthly income tax withheld×Number of months=$1,704×5.5=$9,372 (2)
Calculate social security taxes withheld for Mr. A
Social security tax Withheld=Gross earnings×6%=$44,880×6%=$2,692.80 (3)
Calculate Medicare taxes withheld for Mr. A.
Medicare tax Withheld=Gross earnings×1.5%=$44,880×1.5%=$673.20 (4)
Calculate gross earnings for Mr. K.
Gross earnings=Monthly salary×Number of months=$3,600×7=$25,200 (5)
Calculate federal income tax withheld for Mr. K.
Federal income tax withheld=Monthly income tax withheld×Number of months=$533×7=$3,731 (6)
Calculate social security taxes withheld for Mr. K.
Social security tax Withheld=Gross earnings×6%=$25,200×6%=$1,512 (7)
Calculate Medicare taxes withheld for Mr. K.
Medicare tax Withheld=Gross earnings×1.5%=$25,200×1.5%=$378 (8)
Calculate gross earnings for Mr. Mc.
Gross earnings=Monthly salary×Number of months=$6,420×10.5=$67,410 (9)
Calculate federal income tax withheld for Mr. Mc.
Federal income tax withheld=Monthly income tax withheld×Number of months=$1,238×10.5=$12,999 (10)
Calculate social security taxes withheld for Mr. Mc.
Social security tax Withheld=Gross earnings×6%=$67,410×6%=$4,044.60 (11)
Calculate Medicare taxes withheld for Mr. Mc.
Medicare tax Withheld=Gross earnings×1.5%=$67,410×1.5%=$1,011.15 (12)
Calculate gross earnings for Mr. Mo.
Gross earnings=Monthly salary×Number of months=$4,600×12=$55,200 (13)
Calculate federal income tax withheld for Mr. Mo.
Federal income tax withheld=Monthly income tax withheld×Number of months=$783×12=$9,396 (14)
Calculate social security taxes withheld for Mr. Mo.
Social security tax Withheld=Gross earnings×6%=$55,200×6%=$3,312 (15)
Calculate Medicare taxes withheld for Mr. Mo.
Medicare tax Withheld=Gross earnings×1.5%=$55,200×1.5%=$828 (16)
Calculate gross earnings for Mr. S.
Gross earnings=Monthly salary×Number of months=$4,500×1=$4,500 (17)
Calculate federal income tax withheld for Mr. S.
Federal income tax withheld=Monthly income tax withheld×Number of months=$758×1=$758 (18)
Calculate social security taxes withheld for Mr. S.
Social security tax Withheld=Gross earnings×6%=$4,500×6%=$270 (19)
Calculate Medicare taxes withheld for Mr. S.
Medicare tax Withheld=Gross earnings×1.5%=$4,500×1.5%=$67.50 (20)
Calculate gross earnings for Mr. T.
Gross earnings=Monthly salary×Number of months=$3,250×1.5=$4,875 (21)
Calculate federal income tax withheld for Mr. T.
Federal income tax withheld=Monthly income tax withheld×Number of months=$446×1.5=$669 (22)
Calculate social security taxes withheld for Mr. T.
Social security tax Withheld=Gross earnings×6%=$4,875×6%=$292.50 (23)
Calculate Medicare taxes withheld for Mr. T.
Medicare tax Withheld=Gross earnings×1.5%=$4,875×1.5%=$73.13 (24)
Calculate gross earnings for Mr. W.
Gross earnings=Monthly salary×Number of months=$10,500×8=$84,000 (25)
Calculate federal income tax withheld for Mr. W.
Federal income tax withheld=Monthly income tax withheld×Number of months=$2,359×8=$18,872 (26)
Calculate social security taxes withheld for Mr. W.
Social security tax Withheld=Gross earnings×6%=$84,000×6%=$5,040 (27)
Calculate Medicare taxes withheld for Mr. W.
Medicare tax Withheld=Gross earnings×1.5%=$84,000×1.5%=$1,260 (28)
2.
To calculate: The following employer payroll taxes for the year.
2.
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Explanation of Solution
Calculate the following employer payroll taxes for the year.
(a)
Calculate social security tax.
Social security tax =Sum of Social security tax withheld for all employees=$2,692.80+$1,512+$4,044.60+$3,312+$270+$292.50+$5,040=$17,163.90
(b)
Calculate Medicare tax.
Medicare tax =Sum of Medicare tax withheld for all employees=$673.20+$378.00+$1,011.15+$828.00+$67.50+$73.13+$1,260=$4,290.98
(c)
Calculate State
State Unemployment tax=5.4%on first$10,000of each employee's earnings=5.4%×($10,000+$10,000+$10,000+$10,000+$4,500+$4,875+$10,000)=5.4%×$59,375=$3,206.25
(d)
Calculate Federal unemployment tax.
Federal Unemployment tax=0.8%on first$10,000of each employee's earnings=0.8%×($10,000+$10,000+$10,000+$10,000+$4,500+$4,875+$10,000)=0.8%×$59,375=$475
(e)
Calculate total payroll tax expense.
Total payroll tax expense= (Social security tax +Medicare tax + State Unemployment tax + Federal unemployment tax)= $17,163.90 + $4,290.98 + $3,206.25 + $475= $25,136.13
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Chapter 11 Solutions
Accounting (Text Only)
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