## 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.):

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