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Wage and tax statement data on employer FICA tax Ehrlich Co. began business on January 2, 20Y8. Salaries were paid to employees on the last day of each month, and social security tax. Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly .salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 20Y9, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees’ earnings records were inadvertently destroyed. None of the employees resigned or were discharged during the year, and there were no changes in salary rates. ‘The social security tax was withheld at the rate of 6.0% and Medicare lax at the rate of 1.5%. Data on dates of employment, salary rates, and employees' income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records: Instructions 1. Calculate the amounts to be reported on each employee's Wage and Tax Statement (Form W-2) for 20Y8, arranging the data in the following form: Employee Gross Earnings Federal Income Tax Withheld Social Security Tax Withheld Medicare Tax Withheld 2. Calculate the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee's earnings; (d) federal unemployment compensation at 0.6% on the first $10,000 of each employee's earnings; (e) total.

BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094
BuyFind

Accounting

27th Edition
WARREN + 5 others
Publisher: Cengage Learning,
ISBN: 9781337272094

Solutions

Chapter
Section
Chapter 11, Problem 11.3APR
Textbook Problem

Wage and tax statement data on employer FICA tax

Ehrlich Co. began business on January 2, 20Y8. Salaries were paid to employees on the last day of each month, and social security tax. Medicare tax, and federal income tax were withheld in the required amounts. An employee who is hired in the middle of the month receives half the monthly .salary for that month. All required payroll tax reports were filed, and the correct amount of payroll taxes was remitted by the company for the calendar year. Early in 20Y9, before the Wage and Tax Statements (Form W-2) could be prepared for distribution to employees and for filing with the Social Security Administration, the employees’ earnings records were inadvertently destroyed.

None of the employees resigned or were discharged during the year, and there were no changes in salary rates. ‘The social security tax was withheld at the rate of 6.0% and Medicare lax at the rate of 1.5%. Data on dates of employment, salary rates, and employees' income taxes withheld, which are summarized as follows, were obtained from personnel records and payroll records:

Chapter 11, Problem 11.3APR, Wage and tax statement data on employer FICA tax Ehrlich Co. began business on January 2, 20Y8.

Instructions

  1. 1. Calculate the amounts to be reported on each employee's Wage and Tax Statement (Form W-2) for 20Y8, arranging the data in the following form:
Employee Gross Earnings Federal Income Tax Withheld Social Security Tax Withheld Medicare Tax Withheld
  1. 2. Calculate the following employer payroll taxes for the year: (a) social security; (b) Medicare; (c) state unemployment compensation at 5.4% on the first $10,000 of each employee's earnings; (d) federal unemployment compensation at 0.6% on the first $10,000 of each employee's earnings; (e) total.

Expert Solution

1.

To determine

Payroll: The total payment that a company is required to pay to its employee for the services received is called as payroll.

Payroll withholding deduction: The amounts which the employer withheld from employees’ gross pay to deduct taxes such as federal income tax, state income tax, local income tax, and social security tax are called payroll withholding deduction.

Employer payroll taxes: The taxes which the employer must pay to the employees with their salaries is called employer payroll taxes. Such taxes are not withheld from employees’ gross earnings but instead they are paid by employer.

To calculate: The amount that would be reported on each employee’s wage and tax statement for 20Y8.

Explanation of Solution

Working notes:

Calculate gross earnings for Mr. A.

Gross earnings=Monthlysalary×Number of months=$5,500×1.5=$8,250 (1)

Calculate federal income tax withheld for Mr. A.

Federal income tax withheld=Monthly income tax withheld×Number of months=$944×1.5=$1,416 (2)

Calculate social security taxes withheld for Mr. A

Social security tax Withheld=Grossearnings×6%=$8,250×6%=$495 (3)

Calculate Medicare taxes withheld for Mr. A.

Medicare tax Withheld=Grossearnings×1.5%=$8,250×1.5%=$123.75 (4)

Calculate gross earnings for Mr. C.

Gross earnings=Monthlysalary×Number of months=$4,800×12=$57,600 (5)

Calculate federal income tax withheld for Mr. C.

Federal income tax withheld=Monthly income tax withheld×Number of months=$833×12=$9,996 (6)

Calculate social security taxes withheld for Mr. C.

Social security tax Withheld=Grossearnings×6%=$57,600×6%=$3,456 (7)

Calculate Medicare taxes withheld for Mr. C.

Medicare tax Withheld=Grossearnings×1.5%=$57,600×1.5%=$864 (8)

Calculate gross earnings for Mr. E.

Gross earnings=Monthlysalary×Number of months=$8,000×3=$24,000 (9)

Calculate federal income tax withheld for Mr. E.

Federal income tax withheld=Monthly income tax withheld×Number of months=$1,592×3=$4,776 (10)

Calculate social security taxes withheld for Mr. E.

Social security tax Withheld=Grossearnings×6%=$24,000×6%=$1,440 (11)

Calculate Medicare taxes withheld for Mr. E.

Medicare tax Withheld=Grossearnings×1.5%=$24,000×1.5%=$360 (12)

Calculate gross earnings for Mr. H.

Gross earnings=Monthlysalary×Number of months=$6,000×1=$6,000 (13)

Calculate federal income tax withheld for Mr. H.

Federal income tax withheld=Monthly income tax withheld×Number of months=$1,070×1=$1,070 (14)

Calculate social security taxes withheld for Mr

Expert Solution

2.

To determine

To calculate: The following employer payroll taxes for the year.

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