Question

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 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	Jan. 2	$3,100		$434
Cruz	Oct. 1	5,400		972
Edwards	Apr. 16	2,300		288
Harvin	Nov. 1	2,400		300
Nicks	Jan. 16	5,800		1,305
Shiancoe	Dec. 1	3,400		527
Ward	Feb. 1	6,300		1,355

Required:

1. Calculate the amounts to be reported on each employee's Wage and Tax Statement (Form W-2) for 20Y8.

Note: Round amounts to the nearest whole dollar and enter all amounts as positive values.

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 0.6% on the first $10,000 of each employee’s earnings; (e) total.Note: Round amounts to the nearest whole dollar and enter all amounts as positive values.

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

Answer 1

Payroll:

Payroll is the amount which the company is liable to pay to its employees for their services rendered during the month. It is an expense for the company which has to be paid within a time period.

1.

Wage and tax statement:

Wage and Tax statement (Form W-2) For the year ended 20Y8

Employee	Gross Earnings ($)	Federal Income tax ($)	Social security tax withheld ($)	Medicare tax withheld ($)
Arnett	$37200	$5208	$2232	$558
Cruz	$16200	$2916	$972	$243
Edwards	$19550	$2448	$1173	$239.25
Harvin	$4800	$600	$288	$72
Nicks	$66700	$15007.50	$4002	$1000.50
Shiancoe	$3400	$527	$204	$51
Ward	$69300	$14905	$4158	$1039.50
Total			$13029	$3203.25

Hence, The total social security tax withheld is $13029 and Medicare tax withheld is $3203.25

Employee	Gross Earnings ($) A	Social security tax % B	Social security tax withheld ($) (A*B)	Medicare Tax % C	Medicare tax withheld ($) (A*C)
Arnett	$37200	6%	$2232	1.5%	$558
Cruz	$16200	6%	$972	1.5%	$243
Edwards	$19550	6%	$1173	1.5%	$239.25
Harvin	$4800	6%	$288	1.5%	$72
Nicks	$66700	6%	$4002	1.5%	$1000.50
Shiancoe	$3400	6%	$204	1.5%	$51
Ward	$69300	6%	$4158	1.5%	$1039.50
Total			$13029		$3203.25

Note: Gross Earnings and Federal income tax are calculated in below table:

Gross Earnings and Federal Income Tax Withheld For the year ended 20Y8

Employee	Date of first employed	Number of months(months) A	MonthlySalary ($) B	Gross Earnings ($) (A*B)	Monthly Income Tax Withheld ($) C	Federal Tax Withheld ($) (A*C)
Arnett	Jan 2	12	$3100	$37200	$434	$5208
Cruz	Oct 1	3	$5400	$16200	$972	$2916
Edwards	April 16	8.5	$2300	$19550	$288	$2448
Harvin	Nov 1	2	$2400	$4800	$300	$600
Nicks	Jan 16	11.5	$5800	$66700	$1305	$15007.50
Shiancoe	Dec 1	1	$3400	$3400	$527	$527
Ward	Feb 1	11	$6300	$69300	$1355	$14905

2.

a.

As computed in the above table, Social Security Tax Withheld amount is $13029.

b.

As computed in the above table , Medicare Tax withheld amount is $3203.25

c.

Compute the amount of state unemployment compensation taxon the first 10000 earnings of each employee:

Amount = Total Earnings of employees State unemployment tax expense

= [($100005) + $4800 + $3400] 5.4%

=[$50000+$4800+$3400] 5.4%

Amount =$58200 5.4%

=$3142.8

Hence, the amount of state unemployment compensation tax is =$3142.8

Note:State unemployment tax is computed on first $10000 of each employee and only 5employees have a salary above $10000 as given in the above table and the full amount will be taken for rest of the employees because the amount of rest of the employees is less than $10000.

d.

Compute federal unemployment compensation tax:

Amount = Total Earnings of employees Federal unemployment compensation

= [($100005) + $4800 + $3400] 0.6%

=[$50000+$4800+$3400] 0.6%

Amount =$58200 0.6%

=$349.2

Hence, the amount of Federal unemployment compensation tax is =$349.2

Note:Federal unemployment compensation is computed on first $10000 of each employee and only 5employees have a salary above $10000 as given in the above table and the full amount will be taken for rest of the employees because the amount of rest of the employees is less than $10000.

e.

Compute total payroll tax expense:

Descritpion	Amount($)
Social security withheld as computed above	$13029
Medicare tax withheld as computed above	$3203.25
State unemployment compensation($582005.4%)	$3142.8
Federal unemployment compensation tax ($582000.6%)	$349.2
Total Payroll Tax Expense	$19724.25

Hence, the payroll tax expense is $19724.25