Loose Leaf for Financial Accounting: Information for Decisions
Loose Leaf for Financial Accounting: Information for Decisions
9th Edition
ISBN: 9781260158762
Author: John J Wild
Publisher: McGraw-Hill Education
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Chapter 9, Problem 3PSA

Paloma Co. has four employees. FICA Social Security taxes are 6.2% of the first $127,200 paid to each Problem employee, and FICA Medicare taxes are1.45% of gross pay. Also, for the first $7,000 paid to each employee, the Company’s FUTA taxes are 3.5% and SUTA taxes are 2.5%. The company is preparing its payroll calculations for the week ended August 25. Payroll records show the following information for the company's four employees.

Chapter 9, Problem 3PSA, Paloma Co. has four employees. FICA Social Security taxes are 6.2% of the first $127,200 paid to
In addition to gross pay, the company must pay two-thirds of the $60 per employee weekly health insurance; each employee pays the remaining one-third. The company also contributes an extra 8% of each employee’s gross pay (at no cost to employees) to a pension fund.
Required
Compute the following for the week ended August 25 (Round amounts to the nearest cent):

  1. Each employee’s FICA withholdings 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 (take-home) pay.
  8. Employer’s total payroll-related expenses for each employee.

1.

Expert Solution
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Summary Introduction

Introduction: FICA stands for Federal insurance contribution act. FICA withholding for social security taxes means deductions done from salary to cover the retirement, disability and survivorship after retirement from employment.

To compute: Each employee’s FICA withholdings for Social Security.

Explanation of Solution

Computation of each employee’s FICA withholdings for social security.

    ParticularAmount
    Person D
    Maximum limit for FICA Social security tax$127,200
    Gross pay till August 18 $126,100
    Remaining limit(A)$1,100
    Gross pay for current week(B)$2,000
    Gross pay on which tax has to be deducted(Lower of A & B)$1,100
    FICA social security tax rate6.2%
    FICA social security tax$68.20
    Person T
    Maximum limit for FICA Social security tax$127,200
    Gross pay till August 18$126,300
    Remaining limit(A)$900
    Gross pay for current week(B)$900
    Gross pay on which tax has to be deducted(Lower of A & B)$900
    FICA social security tax rate6.2%
    FICA social security tax$55.80
    Person K
    Maximum limit for FICA Social security tax$127,200
    Gross pay till August 18$6,900
    Remaining limit(A)$120,300
    Gross pay for current week(B)$450
    Gross pay on which tax has to be deducted(Lower of A & B)$450
    FICA social security tax rate6.2%
    FICA social security tax$27.90
    Person C
    Maximum limit for FICA Social security tax$127,200
    Gross pay till August 18$1,250
    Remaining limit(A)$125,950
    Gross pay for current week(B)$400
    Gross pay on which tax has to be deducted(Lower of A & B)$400
    FICA social security tax rate6.2%
    FICA social security tax$24.80

2.

Expert Solution
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Summary Introduction

Introduction: FICA stands for Federal insurance contribution act. FICA withholding for Medicare refer to the amount deducted from the salary of the employee to cover the medical emergencies that will arise after retirement.

To compute: Each employee’s FICA withholdings for Medicare.

Explanation of Solution

Computation of each employee’s FICA withholdings for Medicare.

    ParticularAmount
    Person D
    Gross pay of current week$2,000
    FICA Medicare tax rate1.45%
    FICA Medicare tax$29
    PersonT
    Gross pay of current week$900
    FICA Medicare tax rate1.45%
    FICA Medicare tax$13.05
    PersonK
    Gross pay of current week$450
    FICA Medicare tax rate1.45%
    FICA Medicare tax$6.52
    PersonC
    Gross pay of current week$400
    FICA Medicare tax rate1.45%
    FICA Medicare tax$5.80

3.

Expert Solution
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Summary Introduction

Introduction: Employer’s FICA taxes for social security refer to the total amount of contribution made by the employer for the survivorship and retirement of the employee.

To compute: Employer’s FICA taxes for Social Security.

Explanation of Solution

Computation of Employer’s FICA taxes for social security.

    ParticularAmount
    FICA social security tax of person D$68.20
    FICA social security tax of personT$55.80
    FICA social security tax of personK$27.90
    FICA social security tax of personC$24.80
    Total employer’s FICA taxes for social security$176.70

4.

Expert Solution
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Summary Introduction

Introduction: Employer’s FICA taxes for Medicare refer to the total amount of contribution made by the employer for employee regarding medical emergencies that will arise after retirement.

To compute: Employer’s FICA taxes for Medicare.

Explanation of Solution

Computation of Employer’s FICA taxes for Medicare.

    ParticularAmount
    FICA taxes for Medicare of personD$29
    FICA taxes for Medicare of personT$13.05
    FICA taxes for Medicare of personK$6.52
    FICA taxes for Medicare of personC$5.80
    Total employer’s FICA taxes for Medicare$54.37

5.

Expert Solution
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Summary Introduction

Introduction: FUTA stands for Federal unemployment tax act. It is a law applicable on employers. Main aim of this act is to remove unemployment. For removing unemployment specific amount of fund is collected from the employer.

To compute: Employer’s FUTA taxes.

Explanation of Solution

Computation of Employer’s FUTA taxes.

    ParticularAmount
    Person D
    Maximum limit of gross pay for FUTA taxes$7,000
    Gross pay till August 18$126,100
    Remaining limit(A)$0
    Gross pay for current week(B)$2,000
    Gross pay on which tax has to be deducted(Lower of A & B)$0
    FUTA tax rate3.5%
    FUTA tax$0
    PersonT
    Maximum limit of gross pay for FUTA taxes$7,000
    Gross pay till August 18$126,300
    Remaining limit(A)$0
    Gross pay for current week(B)$900
    Gross pay on which tax has to be deducted(Lower of A & B)$0
    FUTA tax rate3.5%
    FUTA tax$0
    PersonK
    Maximum limit of gross pay for FUTA taxes$7,000
    Gross pay till August 18$6,900
    Remaining limit(A)$100
    Gross pay for current week(B)$450
    Gross pay on which tax has to be deducted(Lower of A & B)$100
    FUTA tax rate3.5%
    FUTA tax$3.50
    PersonC
    Maximum limit of Gross pay for FUTA taxes$7,000
    Gross pay till August18$1,250
    Remaining limit(A)$5,750
    Gross pay for current week(B)$400
    Gross pay on which tax has to be deducted(Lower of A & B)$400
    FUTA tax rate3.5%
    FUTA tax$14
    Total FUTA tax of Employer$17.50

6.

Expert Solution
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Summary Introduction

Introduction: SUTA stands for State unemployment tax act. It is a law applicable on employers. The main aim of this act is to remove unemployment from the state. For removing unemployment specific amount of fund is collected from the employer.

To compute: Employer’s SUTA taxes.

Explanation of Solution

Computation of Employer’s FUTA taxes.

    ParticularAmount
    Person D
    Maximum limit of gross pay for SUTA taxes$7,000
    Gross pay till August 18$126,100
    Remaining limit(A)$0
    Gross pay for current week(B)$2,000
    Gross pay on which tax has to be deducted(Lower of A & B)$0
    SUTA tax rate2.5%
    SUTA tax$0
    PersonT
    Maximum limit of gross pay for FUTA taxes$7,000
    Gross pay till August 18$126,300
    Remaining limit(A)$0
    Gross pay for current week(B)$900
    Gross pay on which tax has to be deducted(Lower of A & B)$0
    SUTA tax rate2.5%
    SUTA tax$0
    PersonK
    Maximum limit of gross pay for FUTA taxes$7,000
    Gross pay till August 18$6,900
    Remaining limit(A)$100
    Gross pay for current week(B)$450
    Gross pay on which tax has to be deducted(Lower of A & B)$100
    SUTA tax rate2.5%
    SUTA tax$2.50
    PersonC
    Maximum limit of Gross pay for FUTA taxes$7,000
    Gross pay till August 18$1,250
    Remaining limit(A)$5,750
    Gross pay for current week(B)$400
    Gross pay on which tax has to be deducted(Lower of A & B)$400
    SUTA tax rate2.5%
    SUTA tax$10
    Total SUTA tax of Employer$12.50

7.

Expert Solution
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Summary Introduction

Introduction: Net (take-home) pay refer to the amount that a person has in hand after making deductions regarding the expenses and contribution made by individual towards various withholdings.

To compute: Each employee’s net (take-home) pay.

Explanation of Solution

Computation of each employee’s net (take home) pay.

    ParticularPerson DPersonTPersonKPersonC
    Gross Pay$2,000$900$450$400
    Less: Income Tax Withholding($284) ($145)($39)($30)
    Less: FICA social security tax ($68.20)($55.80)($27.90)($24.80)
    Less: FICA taxes for Medicare($29)($13.05)($6.52)($5.80)
    Less: Weekly health insurance($20)($20)($20)($20)
    Net (take home) pay$1598.8$666.15$356.58$319.4

8.

Expert Solution
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Summary Introduction

Introduction: Payroll-related expenses refer to those expenses which are done by the employer towards employee for their well-being and all other payment made to government in respect of employee.

To compute: Employer’s total payroll-related expense for each employee.

Explanation of Solution

Computation of employer’s total payroll-related expense for each employee.

    ParticularPersonDPersonTPersonKPersonC
    Gross pay$2,000$900$450$400
    Employer’s FICA taxes for social security$68.20$55.80$27.90$24.80
    Employer’s FICA taxes for Medicare$29$13.05$6.52$5.80
    Employer’s FUTA taxes$0$0$3.5$14
    Employer’s SUTA taxes$0$0$2.50$10
    Employee weekly health insurance$40$40$40$40
    Total payroll-related expense$2137.20$1008.85$530.42$494.60

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Students have asked these similar questions
Paloma Company has four employees. FICA Social Security taxes are 6.2% of the first $137,700 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. Also, for the first $7,000 paid to each employee, the company's FUTA taxes are 0.6% and SUTA taxes are 5.4%. The company is preparing its payroll calculations for the week ended August 25. Payroll records show the following information for the company's four employees. Current Week ces Name Gross Pay through August 18 $ 124,100 Dali Trey Kiesha Chee 133,900 9,100 3,050 Gross Pay Income Tax Withholding $ 4,800 $ 568 3,800 298 1,000 56 1,000 45 In addition to gross pay, the company must pay one-half of the $100 per employee weekly health insurance; each employee pays the remaining one-half. The company also contributes an extra 8 % of each employee's gross pay (at no cost to employees) to a pension fund. Required: Compute the following for the week ended August 25. Note: Round your intermediate calculations and final answers…
Paloma Company has four employees. FICA Social Security taxes are 6.2 % of the first $137,700 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. Also, for the first $7,000 paid to each employee, the company's FUTA taxes are 0.6% and SUTA taxes are 5.4%. The company is preparing its payroll calculations for the week ended August 25. Payroll records show the following information for the company's four employees. Name Dali Trey Kiesha Chee Gross Pay through August 18 $ 125,400 135,300 7,800 1,750 Employee Tax Rate Dali Current Week Trey Kiesha Chee Gross Pay $ 5,600 2,400 1,600 2,000 In addition to gross pay, the company must pay one-half of the $74 per employee weekly health insurance, each employee pays the remaining one-half. The company also contributes an extra 8% of each employee's gross pay (at no cost to employees) to a pension fund. Required: Compute the following for the week ended August 25 Note: Round your intermediate calculations and final answers to 2…
Paloma Company has four employees. FICA Social Security taxes are 6.2% of the first $137,700 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay. Also, for the first $7,000 paid to each employee, the company's FUTA taxes are 0.6% and SUTA taxes are 5.4%. The company is preparing its payroll calculations for the week ended August 25. Payroll records show the following information for the company's four employees. Name Dali Trey Kiesha Chee Gross Pay through August 18 $ 124,100 133,900 9,100 3,050 Current Week Gross Pay $ 4,800 Income Tax Withholding 3,800 $ 568 298 1,000 1,000 56 45 In addition to gross pay, the company must pay one-half of the $100 per employee weekly health insurance; each employee pays the remaining one-half. The company also contributes an extra 8% of each employee's gross pay (at no cost to employees) to a pension fund. Required: Compute the following for the week ended August 25. Note: Round your intermediate calculations and final answers to 2…

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Loose Leaf for Financial Accounting: Information for Decisions

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