Thursday, 10 December 2015

Paloma Co. Stars has four employees. FICA Social Security taxes are 6.2% of the first $110,100 paid to each employee, and FICA Medicare taxes are 1.45% of gross pay.

Problem 9-2A Payroll expenses, withholdings, and taxes LO P2, P3
Paloma Co. Stars has four employees. FICA Social Security taxes are 6.2% of the first $110,100 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 0.8% and SUTA taxes are 2.15%. 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
   
Name Gross Pay
through 8/18
Gross Pay Income Tax Withholding
  Dahlia   $ 107,200     $ 3,800     $ 276  
  Trey     36,250       820       137  
  Kiesha     8,000       630       57  
  Chee     1,950       580       48  

 
In addition to gross pay, the company must pay one-half of the $60 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 (Round your answers to 2 decimal places.):

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Explanation:
1. Each employee’s FICA withholdings for Social Security.
  
  Dahlia Trey Kiesha Chee Total
  Maximum base $ 110,100   $ 110,100   $ 110,100   $ 110,100      
  Earned through 8/18   107,200     36,250     8,000     1,950      
  











   
  Amount subject to tax $ 2,900   $ 73,850   $ 102,100   $ 108,150      
                                            
  Earned this week $ 3,800   $ 820   $ 630   $ 580      
                                            
  Subject to tax   2,900     820     630     580      
  Tax rate   6.20 %   6.20 %   6.20 %   6.20 %    
  











   
  Social Security tax $ 179.80   $ 50.84   $ 39.06   $ 35.96   $ 305.66  
  




























  
2. Each employee’s FICA withholdings for Medicare.
  
  Dahlia Trey Kiesha Chee Total
  Earned this week $ 3,800   $ 820   $ 630   $ 580      
  Tax rate   1.45 %   1.45 %   1.45 %   1.45 %    
  











   
  Medicare tax $ 55.10   $ 11.89   $ 9.14   $ 8.41   $ 84.54  
  




























  
3. Employer's FICA taxes for Social Security.
  
  Dahlia Trey Kiesha Chee Total
  Amount from Social Security $ 179.80     $ 50.84     $ 39.06   $ 35.96   $ 305.66
  




























  
4. Employer's FICA taxes for Medicare.
  
  Dahlia Trey Kiesha Chee Total
  Amount from Medicare $ 55.10      $ 11.89   $ 9.14   $ 8.41   $ 84.54  
  




























  
5. Employer's FUTA taxes.
  
  Dahlia Trey Kiesha Chee Total
  Maximum base $ 7,000   $ 7,000   $ 7,000   $ 7,000      
  Earned through 8/18 107,200 36,250 8,000 1,950
  











  Amount subject to tax   0     0     0     5,050      
                                            
  Earned this week $ 3,800   $ 820   $ 630   $ 580      
                                            
  Subject to tax   0     0     0     580      
  Tax rate   0.8 %   0.8 %   0.8 %   0.8 %    
  











   
  FUTA tax $ 0.00   $ 0.00   $ 0.00   $ 4.64   $ 4.64  
  




























  
6. Employer's SUTA taxes.
  
  Dahlia Trey Kiesha Chee Total
  Subject to tax (from 5) $ 0   $ 0   $ 0   $ 580      
  Tax rate   2.15 %   2.15 %   2.15 %   2.15 %    
  











   
  SUTA tax $ 0.00   $ 0.00   $ 0.00   $ 12.47   $ 12.47  
  




























  
7. Each employee's net (take-home) pay.
  
  Dahlia Trey Kiesha Chee Total
 Gross earnings $ 3,800.00   $ 820.00   $ 630.00   $ 580.00   $ 5,830.00   
 Less                                          
 FICA Social Sec. tax   (179.80 )   (50.84 )   (39.06 )   (35.96 )   (305.66)  
 FICA Medicare taxes   (55.10 )   (11.89 )   (9.14 )   (8.41 )   (84.54)  
 Withholding taxes   (276.00 )   (137.00 )   (57.00 )   (48.00 )   (518.00)  
 Health insurance   (30.00 )   (30.00 )   (30.00 )   (30.00 )   (120.00)  
  













 Take-home pay $ 3,259.10   $ 590.27   $ 494.80   $ 457.63   $ 4,801.80  
  





























8. Employer's total payroll-related expense for each employee.

  Dahlia Trey Kiesha Chee Total
  Gross earnings $ 3,800.00      $ 820.00   $ 630.00   $ 580.00   $ 5,830.00  
  Plus                            
  FICA Social Sec. tax   179.80     50.84     39.06     35.96     305.66  
  FICA Medicare taxes   55.10     11.89     9.14     8.41     84.54  
  FUTA tax   0.00     0.00     0.00     4.64     4.64  
  SUTA tax   0.00     0.00     0.00     12.47     12.47  
  Health insurance   30.00     30.00     30.00     30.00     120.00  
  Pension contrib. (8%)   304.00     65.60     50.40     46.40     466.40  
  













  Total payroll expense $ 4,368.90   $ 978.33   $ 758.60   $ 717.88   $ 6,823.71