Chapter 9, Problem 3PSB

To determine

Tax:

It is a compulsory financial charge imposed by government on individuals and corporate, failure to pay which invites legal actions.

1.

Employee’s FICA for social security.

Explanation of Solution

Employee’s FICA for social security

Formula to calculate FICA for social security,

  $\text{FICA}\text{Social}\text{security}\text{tax}=6.2\%\times \text{pay}\text{till}\text{\$118,500}$

For A

Substitute $1600 for pay.

  $\begin{array}{c}\text{FICA}\text{Social}\text{security}\text{tax}=6.2\%\times \text{\$1,600}\\ =\$99.20\end{array}$

For C

Substitute $1,515 for pay.

  $\begin{array}{c}\text{FICA}\text{Social}\text{security}\text{tax}=6.2\%\times \text{\$1,515}\\ =\$93.93\end{array}$

For J

Substitute $475 for pay.

  $\begin{array}{c}\text{FICA}\text{Social}\text{security}\text{tax}=6.2\%\times \text{\$475}\\ =\$29.45\end{array}$

For M

Substitute $1,000 for pay.

  $\begin{array}{c}\text{FICA}\text{Social}\text{security}\text{tax}=6.2\%\times \text{\$1,000}\\ =\$62\end{array}$

Thus, FICA for social security of A is $99.20, C is $93.93, J is $29.45 and M is $62.

2.

To determine

Employee’s FICA Medicare taxes.

Explanation of Solution

Employee’s FICA Medicare taxes

Formula to calculate FICA Medicare taxes,

  $\text{FICA Medicare taxes}=1.45\%\times \text{gross}\text{pay}$

For A

Substitute $2,500 for gross pay.

  $\begin{array}{c}\text{FICA Medicare taxes}=1.45\%\times \$\text{2,500}\\ =\text{\$36}\text{.25}\end{array}$

For C

Substitute $1,515 for gross pay.

  $\begin{array}{c}\text{FICA Medicare taxes}=1.45\%\times \$1,515\\ =\text{\$21}\text{.95}\end{array}$

For J

Substitute $475 for gross pay.

  $\begin{array}{c}\text{FICA Medicare taxes}=1.45\%\times \$\text{475}\\ =\text{\$6}\text{.89}\end{array}$

For M

Substitute $1,000 for gross pay.

  $\begin{array}{c}\text{FICA Medicare taxes}=1.45\%\times \$1,0\text{00}\\ =\text{\$14}\text{.50}\end{array}$

Thus, FICA Medicare taxes for A are $36.25, Care $21.95, J are $6.89 and M are $14.50.

3.

To determine

Employer’s FICA for social security.

Explanation of Solution

Employer’s FICA for social security

Formula to calculate FICA for social security,

  $\text{FICA}\text{Social}\text{security}\text{tax}=6.2\%\times \text{pay}\text{till}\text{\$118,500}$

For A

Substitute $1,600 for pay.

  $\begin{array}{c}\text{FICA}\text{Social}\text{security}\text{tax}=6.2\%\times \text{\$1,600}\\ =\$99.20\end{array}$

For C

Substitute $1,515 for pay.

  $\begin{array}{c}\text{FICA}\text{Social}\text{security}\text{tax}=6.2\%\times \text{\$1,515}\\ =\$93.93\end{array}$

For J

Substitute $475 for pay.

  $\begin{array}{c}\text{FICA}\text{Social}\text{security}\text{tax}=6.2\%\times \text{\$475}\\ =\$29.45\end{array}$

For M

Substitute $1,000 for pay.

  $\begin{array}{c}\text{FICA}\text{Social}\text{security}\text{tax}=6.2\%\times \text{\$1,000}\\ =\$62\end{array}$

Thus, FICA for social security of A is $99.20, Cis $93.93, J is $29.45 and M is $62.

4.

To determine

Employer’s FICA Medicare taxes

Explanation of Solution

Employer’s FICA Medicare taxes

Formula to calculate FICA Medicare taxes,

  $\text{FICA Medicare taxes}=1.45\%\times \text{gross}\text{pay}$

For A

Substitute $2,500 for gross pay.

  $\begin{array}{c}\text{FICA Medicare taxes}=1.45\%\times \$\text{2,500}\\ =\$3\text{6}\text{.25}\end{array}$

For C

Substitute $1,515 for gross pay.

  $\begin{array}{c}\text{FICA Medicare taxes}=1.45\%\times \$1,515\\ =\text{\$21}\text{.95}\end{array}$

For J

Substitute $475 for gross pay.

  $\begin{array}{c}\text{FICA Medicare taxes}=1.45\%\times \$\text{475}\\ =\$\text{6}\text{.89}\end{array}$

For M

Substitute $1,000 for gross pay.

  $\begin{array}{c}\text{FICA Medicare taxes}=1.45\%\times \$1,000\\ =\text{\$14}\text{.50}\end{array}$

Thus, FICA Medicare taxes for A are $36.25, C are $21.95, J are $6.89 and M are $14.50.

5.

To determine

Employer’s FUTA taxes.

Explanation of Solution

Employer’s FUTA taxes

Formula to calculate FUTA taxes,

  $\text{FUTA}\text{}\text{taxes}=0.6\%\times \text{pay}\text{till}\text{\$7,000}$

For A

Substitute $0 for pay.

  $\begin{array}{c}\text{FUTA}\text{}\text{taxes}=0.6\%\times 0\\ =0\end{array}$

For C

Substitute $0 for pay.

  $\begin{array}{c}\text{FUTA}\text{}\text{taxes}=0.6\%\times 0\\ =0\end{array}$

For J

Substitute $350 for pay.

  $\begin{array}{c}\text{FUTA}\text{}\text{taxes}=0.6\%\times \$350\\ =2.10\end{array}$

For M

Substitute $0 for pay.

  $\begin{array}{c}\text{FUTA}\text{}\text{taxes}=0.6\%\times \text{0}\\ =0\end{array}$

Thus, FUTA taxes for A are 0, C are 0, J are $2.10 and M are 0.

6.

To determine

Employer’s SUTA taxes

Explanation of Solution

Employer’s SUTA taxes

Formula to calculate SUTA taxes

  $\text{SUTA}\text{}\text{taxes}=2.15\%\times \text{pay}\text{till}\text{\$7,000}$

For A, substitute $0 for pay

  $\begin{array}{c}\text{SUTA}\text{}\text{taxes}=2.15\%\times \text{0}\\ \text{=0}\end{array}$

For C, substitute $0 for pay.

  $\begin{array}{c}\text{SUTA}\text{}\text{taxes}=2.15\%\times \text{0}\\ \text{=0}\end{array}$

For J, substitute $350 for pay.

  $\begin{array}{c}\text{SUTA}\text{}\text{taxes}=2.15\%\times \$350\\ \text{=\$6}\text{.13}\end{array}$

For M, substitute 0 for pay

  $\begin{array}{c}\text{SUTA}\text{}\text{taxes}=2.15\%\times 0\\ \text{=0}\end{array}$

Thus, SUTA taxes for A are 0, C are 0, J are $6.130 and M are 0

7.

To determine

Employee’s net home pay

Explanation of Solution

Employee’s net home pay

Employees	Gross Pay($)	Income Tax($)	Social Security($)	Medicare($)	Health insurance($)	Net Pay($)
A	2,500	198	99.20	36.25	25	2,141.55
C	1,515	182	93.93	21.97	25	1,192.10
J	475	32	29.45	6.89	25	381.66
M	1,000	68	62	14.50	25	830.50
Total						4,545.81

Table (1)

Thus, employee’s net pay is $4,545.81

8.

To determine

Employer’s total payroll related expense

Explanation of Solution

Employer’s total payroll related expense

Employees	Gross Earning($)	Social Security($)	Medicare($)	FUTA($)	SUTA($)	Health insurance($)	Pension fund	Net Pay($)
D	2,500	99.20	36.25	0	0	25	125	2,785.45
T	1,515	93.93	21.97	0	0	25	75.75	1,731.65
K	475	29.45	6.89	2.10	6.13	25	23.75	568.32
C	1,000	62	14.50	0	0	25	50	1,151.50
Total								6,236.92

Table (2)