Chapter 11, Problem 3APSA

To determine

Payroll Taxes:

The taxes liable on wages earned by employees during specified period of time are payroll taxes.

Gross Pay:

The total compensation earned by an employee before any deduction is called gross pay. It is the base amount for the computation of payroll taxes.

To determine:

Computation of the following for the week ended August 25

1. Each employee’s FICA withholding for Social Security.
2. Each employee’s FICA withholdings for Medicare
3. Employer’s FICA taxes for Social Security.
4. Employer’s FICA taxes for Medicare.
5. Employer’s FUTA taxes
6. Employer’s SUTA taxes
7. Each employee’s net pay.
8. Employer’s total payroll-related expense for each employee.

Answer to Problem 3APSA

Solution:

1. Employee’s FICA withholdings for social security.

	Dahlia	Trey	Kiesha	Chee	Total
Social Security Tax	$68.20	$55.80	$27.90	$24.80	$176.70

2. Employee’s FICA withholdings for Medicare

	Dahlia	Trey	Kiesha	Chee	Total
Medicare tax	$29	$13.05	$6.53	$5.80	$54.38

3. Employer’s FICA taxes for Social Security

	Dahlia	Trey	Kiesha	Chee	Total
Employer’s FICA for Social Security	$68.20	$55.80	$27.90	$24.80	$176.70

4. Employer’s FICA taxes for Medicare

	Dahlia	Trey	Kiesha	Chee	Total
Employer’s FICA taxes for Medicare	$29	$13.05	$6.53	$5.80	$54.38

5. Employer’s FUTA taxes

	Dahlia	Trey	Kiesha	Chee	Total
Employer’s FUTA Tax	$0	$0	$0	$2.40	$2.40

6. Employer’s SUTA taxes

	Dahlia	Trey	Kiesha	Chee	Total
Employer’s SUTA Tax	$0	$0	$0	$8.60	$8.60

7. Net Pay of each Employee

	Dahlia	Trey	Kiesha	Chee	Total
Net (take-home) Pay	$1,588.8	$656.15	$346.57	$309.4	$2,900.92

8. Employer’s total payroll expense for each employee

	Dahlia	Trey	Kiesha	Chee	Total
Total Payroll expense	$2,287.20	$1,070.85	$550.43	$503.60	$4412.08

Explanation of Solution

Explanation:

1.

	Dahlia	Trey	Kiesha	Chee	Total
Maximum Base	$117,000	$117,000	$117,000	$117,000
Earned through Aug. 2018	$115,900	$116,100	$7,100	$1,050
Amount subject to tax	$1,100	$900	$109,900	$115,950
Earned during current month	$2,000	$900	$450	$400
Subject to tax	$1,100	$900	$450	$400
Tax rate	6.20%	6.20%	6.20%	6.20%
Social Security Tax	$68.20	$55.80	$27.90	$24.80	$176.70

2.

	Dahlia	Trey	Kiesha	Chee	Total
Earned during current month	$2,000	$900	$450	$400
Tax rate	1.45%	1.45%	1.45%	1.45%
Medicare tax	$29	$13.05	$6.53	$5.80	$54.38

3. Same as Employee’s FICA taxes for social security

	Dahlia	Trey	Kiesha	Chee	Total
Employer’s FICA for Social Security	$68.20	$55.80	$27.90	$24.80	$176.70

4. Same as Employee’s FICA taxes for Medicare

	Dahlia	Trey	Kiesha	Chee	Total
Employer’s FICA taxes for Medicare	$29	$13.05	$6.53	$5.80	$54.38

5.

	Dahlia	Trey	Kiesha	Chee	Total
Maximum Base	$7,000	$7,000	$7,000	$7,000
Earned through Aug. 2018	$115,900	$116,100	$7,100	$1,050
Amount Subject to tax	0	0	0	$5,950
Earned during current month	$2,000	$900	$450	$400
Subject to tax	0	0	0	$400
Tax Rate	0.6%	0.6%	0.6%	0.6%
Employer’s FUTA Tax	$0	$0	$0	$2.40	$2.40

6.

	Dahlia	Trey	Kiesha	Chee	Total
Subject to tax (same as FUTA )	0	0	0	$400
Tax Rate	2.15%	2.15%	2.15%	2.15%
Employer’s SUTA Tax	$0	$0	$0	$8.60	$8.60

7.

	Dahlia	Trey	Kiesha	Chee	Total
Gross Pay	$2,000	$900	$450	$400	$3,750
Less:
FICA Social Security tax	$(68.20)	$(55.80)	$(27.90)	$(24.80)	$(176.70)
FICA Medicare tax	$(29)	$(13.05)	$(6.53)	$(5.80)	$(54.38)
Income Tax Withholding	$(284)	$(145)	$(39)	$(30)	$(498)
Health Insurance	$(30)	$(30)	$(30)	$(30)	$(120)
Net (take-home) Pay	$1,588.8	$656.15	$346.57	$309.4	$2,900.92

8.

	Dahlia	Trey	Kiesha	Chee	Total
Gross Pay	$2,000	$900	$450	$400	$3,750
Less:
FICA Social Security tax	$68.20	$55.80	$27.90	$24.80	$176.70
FICA Medicare tax	$29	$13.05	$6.53	$5.80	$54.38
FUTA	$0	$0	$0	$2.40	$2.40
SUTA	$0	$0	$0	$8.60	$8.60
Health Insurance	$30	$30	$30	$30	$120
Pension fund contribution (8%)	$160	$72	$36	$32	$300
Total Payroll expense	$2,287.20	$1,070.85	$550.43	$503.60	$4412.08

Conclusion

Conclusion:

The total payroll expenses of employer for each employees is $2,287.20 for Dahlia, $1,070.85
for Trey, $550.43 for Kiesha and $503.60 for Chee.