Question

Ehrlich Co. began business on January 2. 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 the following year, 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% on salary. 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:

Employee	Date First Employed	Monthly Salary		Monthly Income Tax Withheld
Arnett	Nov. 16	$3,300		$488
Cruz	Jan. 2	5,700		1,072
Edwards	Oct. 1	2,200		273
Harvin	Dec. 1	2,500		310
Nicks	Feb. 1	10,500		2,363
Shiancoe	Mar. 1	3,700		566
Ward	Nov. 16	8,400		1,814

Required:

1. Calculate the amounts to be reported on each employee's Wage and Tax Statement (Form W-2). Enter amounts to the nearest cent if required. Enter all amounts as positive numbers.

Employee	Gross Earnings		Federal Income Tax Withheld		Social Security Tax Withheld		Medicare Tax Withheld
Arnett	$		$		$		$
Cruz
Edwards
Harvin
Nicks
Shiancoe
Ward
					$		$

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 0.8% on the first $10,000 of each employee's earnings; (e) total. Round your answers to two decimal places.

(a)	$
(b)	$
(c)	$
(d)	$
(e)	$

Answer 1

1.

Employee	Duration	Gross earnings (a)	Federal income tax withheld	SS tax withheld (a * 6%)	Medicare withheld (a * 1.5%)
Arnett	For 1.5 months	4950	488	297	74.25
		(3300*1.5)
Cruz	For 12 months	68400	1072	4104	1026
		(5700*12)
Edwards	For 3 months	6600	273	396	99
		(2200*3)
Harvin	For 1 month	2500	310	150	37.5
		(2500*1)
Nicks	For 11 months	115500	2363	6930	1732.5
		(10500*11)
Shiancoe	For 10 months	37000	566	2220	555
		(3700*10)
Ward	For 1.5 months	12600	1814	756	189
		(8400*1.5)
Total		247550	6886	14853	3713.25

2.

a. Social security tax= $14853 (refer previous table)

b. Medicare tax = $3713.25 (refer previous table)

c. State unemployment compensation - 5.4% on first $10000

Employee	Gross earnings	If > 10000, restricted to 10000 (a)	State unemployment compensation (a * 5.4%)
Arnett	4950	4950	267.3
Cruz	68400	10000	540
Edwards	6600	6600	356.4
Harvin	2500	2500	135
Nicks	115500	10000	540
Shiancoe	37000	10000	540
Ward	12600	10000	540
Total	247550		2918.7

d. Federal unemployment compensation - 0.8% on first $10000

Employee	Gross earnings	If > 10000, restricted to 10000 (a)	State unemployment compensation (a * 0.8%)
Arnett	4950	4950	39.6
Cruz	68400	10000	80
Edwards	6600	6600	52.8
Harvin	2500	2500	20
Nicks	115500	10000	80
Shiancoe	37000	10000	80
Ward	12600	10000	80
Total	247550		432.4

e. Total = $14853 + $3713.25 + $2918.7 + $432.4 = $21917.35