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Mattola Company is giving each of its employees a holiday bonus of $100 on December 13 (a nonpayday). The company wants each employee’s check to be $100. The supplemental tax percent is used. a. What will be the gross amount of each bonus if each employee pays a state income tax of 2.8% (besides the other payroll taxes)? $_____ b. What would the net amount of each bonus check be if the company did not gross-up the bonus? $_____

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

19th Edition
BIEG
Publisher: CENGAGE L
ISBN: 9781337619783
Chapter 4, Problem 10PA
Textbook Problem
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Mattola Company is giving each of its employees a holiday bonus of $100 on December 13 (a nonpayday). The company wants each employee’s check to be $100. The supplemental tax percent is used.

  1. a. What will be the gross amount of each bonus if each employee pays a state income tax of 2.8% (besides the other payroll taxes)?    $_____
  2. b. What would the net amount of each bonus check be if the company did not gross-up the bonus?    $_____

a.

To determine

Calculate the gross amount of each bonus if each employee pays a state income tax of 2.8%.

Explanation of Solution

Gross pay: Gross pay is a payment made to an employee for completion of work allocated by the company. Gross pay is computed by using normal hours worked by the employee with hourly wages rate.

Income tax withholding: Under federal law, the employer is required to withhold a certain amount from the total earnings of the employer. The amounts that are withheld by the employer are applied to the payment of the employee’s federal income tax.

Calculate the gross amount of each bonus if each employee pays a state income tax of 2.8%.

Gross-Up Amount = Intended Payment1Applicable taxes

b.

To determine

Calculate the net amount of each bonus check be when the company did not gross-up the bonus.

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Chapter 4 Solutions

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