For all payroll calculations, use the following tax rates and round amounts to the nearest centEmployee: OASDI: 6.2% on first $118,500 earned; Medicare 1.45% up to $200,000, 2.35% on earnings above $200,000.Employer: OASDI: 6.2% on first $118,500 earned; Medicare: 1.45%; FUTA: 0.6% on first $7,000 earned; SUTA: 5.4% on first $7,000 earned.Accounting treatment for contingenciesFreeman Motors, a motorcycle manufacturer, had the following contingencies.Freeman estimates that it is reasonably possible but not likely that it will lose a current lawsuit. Freeman’s attorneys estimate the potential loss will be $4,500,000.Freeman received notice that it was being sued. Freeman considers this lawsuit to be frivolous.Freeman is currently the defendant in a lawsuit. Freeman believes it is likely that it will lose the lawsuit and estimates the damages to be paid will be $75,000.Determine the appropriate accounting treatment for each of the situations Freeman is facing.

Contingent liability: It is a potential liability of a company that depends on a future event. It…

Answered: For all payroll calculations, use the…

PAYROLL ACCT.,2019 ED.(LL)-TEXT

19th Edition

ISBN:9781337619783

Author:BIEG

Publisher:BIEG

Chapter5: Unemployment Compensation Taxes

Section: Chapter Questions

Problem 4PA

See similar textbooks

Related questions

Question

For all payroll calculations, use the following tax rates and round amounts to the nearest cent

Employee: OASDI: 6.2% on first $118,500 earned; Medicare 1.45% up to $200,000, 2.35% on earnings above $200,000.

Employer: OASDI: 6.2% on first $118,500 earned; Medicare: 1.45%; FUTA: 0.6% on first $7,000 earned; SUTA: 5.4% on first $7,000 earned.

Accounting treatment for contingencies

Freeman Motors, a motorcycle manufacturer, had the following contingencies.

Freeman estimates that it is reasonably possible but not likely that it will lose a current lawsuit. Freeman’s attorneys estimate the potential loss will be $4,500,000.
Freeman received notice that it was being sued. Freeman considers this lawsuit to be frivolous.
Freeman is currently the defendant in a lawsuit. Freeman believes it is likely that it will lose the lawsuit and estimates the damages to be paid will be $75,000.

Determine the appropriate accounting treatment for each of the situations Freeman is facing.

Expert Solution

Trending now

This is a popular solution!

Step by step

Solved in 2 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.

Similar questions