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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 tax at the rate of 1.5%. Data on dates of employment, salary rates, and employees’ income taxes with-held, 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: 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.

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Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124

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BuyFindarrow_forward

Financial Accounting

15th Edition
Carl Warren + 2 others
Publisher: Cengage Learning
ISBN: 9781337272124
Chapter 11, Problem 3PA
Textbook Problem
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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 tax at the rate of 1.5%. Data on dates of employment, salary rates, and employees’ income taxes with-held, which are summarized as follows, were obtained from personnel records and payroll records:

Chapter 11, Problem 3PA, Wage and tax statement data on employer FICA tax Ehrlich Co. began business on January 2, 20Y8. , example  1

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:

Chapter 11, Problem 3PA, Wage and tax statement data on employer FICA tax Ehrlich Co. began business on January 2, 20Y8. , example  2

  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.

1.

To determine

Calculate the amount that would be reported on each employee’s wage and tax statement for 20Y8.

Explanation of Solution

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.

Calculate the amount that would be reported on each employee’s wage and tax statement for 20Y8.

EmployeeGross EarningsFederal Income Tax WithheldSocial Security Tax WithheldMedicare Tax Withheld
Mr. A$8,250(1)$1,416(2)$495.00(3)$123.75(4)
Mr. C$57,600(5)$9,996(6)$3,456.00(7)$864.00(8)
Mr. E$24,000(9)$4,776(10)$1,440.00(11)$360.00(12)
Mr. H$6,000(13)$1,070(14)$360.00(15)  $90.00(16)
Mr. N$110,000(17)$25,850(18)$6,600.00(19)$1,650.00(20)
Mr. S$116,000(21)$26,000(22)$6,960.00(23)$1,740.00(24)
Mr. W$7,830(25)$1,314(26)$469.80(27)$117.45(28)

Working notes:

(1)

Calculate gross earnings for Mr. A.

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

(2)

Calculate federal income tax withheld for Mr. A.

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

(3)

 Calculate social security taxes withheld for Mr. A

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

(4)

Calculate Medicare taxes withheld for Mr. A.

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

(5)

Calculate gross earnings for Mr. C.

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

(6)

Calculate federal income tax withheld for Mr. C.

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

(7)

 Calculate social security taxes withheld for Mr. C.

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

(8)

Calculate Medicare taxes withheld for Mr. C.

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

(9)

Calculate gross earnings for Mr. E.

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

(10)

Calculate federal income tax withheld for Mr. E.

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

(11)

 Calculate social security taxes withheld for Mr. E.

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

(12)

Calculate Medicare taxes withheld for Mr. E.

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

(13)

Calculate gross earnings for Mr. H.

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

(14)

Calculate federal income tax withheld for Mr

2.

To determine

Calculate the following employer payroll taxes for the year.

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Chapter 11 Solutions

Financial Accounting
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