Question

Wage and Tax Statement Data on Employer FICA Tax

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	$3,400		$503
Cruz	Jan. 2	5,400		1,015
Edwards	Oct. 1	2,400		298
Harvin	Dec. 1	2,100		260
Nicks	Feb. 1	10,600		2,385
Shiancoe	Mar. 1	3,200		490
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	Federal income tax withheld	Social security tax withheld	Medicare tax withheld
				a		a*6%	a*1.5%
	Arnett	For 1.5 months		5100	754.50	306	76.50
				(3400*1.5)	(503*1.5)
	Cruz	For 12 months		64800	12180	3888	972
				(5400*12)	(1,015*12)
	Edwards	For 3 months		7200	894	432	108
				(2400*3)	(298*3)
	Harvin	For 1 month		2100	260	126	31.5
				(2100*1)	(260*1)
	Nicks	For 11 months		116600	26235	6996	1749
				(10600*11)	(2,385*11)
	Shiancoe	For 10 months		32000	4900	1920	480
				(3200*10)	(490*10)
	Ward	For 1.5 months		12600	2721	756	189
				(8400*1.5)	(1,814*1.5)
	Total			240400	47944.5	14424	3606

2.

(a)	Social security tax= $14424 (refer previous table)
(b)	Medicare tax= $ 3606 (refer previous table)

C)

Employee	Gross earnings	If >10000 restricted to $10000	State unemployment compensation @ 5.4%
		a	a*5.4%
Arnett	5100	5100	275.40
Cruz	64800	10000	540
Edwards	7200	7200	388.8
Harvin	2100	2100	113.40
Nicks	116600	10000	540
Shiancoe	32000	10000	540
Ward	12600	10000	540
Total	240400		2937.60

D)

Employee	Gross earnings	If >10000 restricted to $10000	Federal unemployment compensation @ 0.8%
Arnett	5100	5100	40.80
Cruz	64800	10000	80
Edwards	7200	7200	57.6
Harvin	2100	2100	16.80
Nicks	116600	10000	80
Shiancoe	32000	10000	80
Ward	12600	10000	80
Total	240400		435.20

E) Total = 14424 + 3606 + 2937.60 + 435.20 = $21,402.80

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