Old Town Entertainment has two employees in Year 1. Clay earns $4,400 per month, and Philip,...

Old Town Entertainment has two employees in Year 1. Clay earns $4,400 per month, and Philip, the manager, earns $10,100 per month. Neither is paid extra for working overtime. Assume the Social Security tax rate is 6 percent on the first $110,000 of earnings and the Medicare tax rate is 1.5 percent on all earnings. The federal income tax withholding is 16 percent of gross earnings for Clay and 20 percent for Philip. Both Clay and Philip have been employed all year.

Required
a. Calculate the net pay for both Clay and Philip for March.
b. Calculate the net pay for both Clay and Philip for December.
c. Is the net pay the same in March and December for both employees?
d. What amounts will Old Town report on the Year 1 W-2s for each employee?

What amounts will Old Town report on the Year 1 W-2s for each employee? (Do not round intermediate calculations.)

Amount Appearing on W-2 for Year 1
Clay
Box 1	Wages, tips, and other compensation
Box 2	Federal income tax withheld
Box 3	Social security wages
Box 4	Social security tax withheld
Box 5	Medicare wages and tips
Box 6	Medicare tax withheld

Philip
Box 1	Wages, tips, and other compensation
Box 2	Federal income tax withheld
Box 3	Social security wages
Box 4	Social security tax withheld
Box 5	Medicare wages and tips
Box 6	Medicare tax withheld

Solutions

Expert Solution

net pay= total gross earnings - federal income tax - social security tax - medicare tax

ekkarill92 answered 1 year ago

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