Question

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	5,500		990
Edwards	Apr. 16	2,600		325
Harvin	Nov. 1	2,600		325
Nicks	Jan. 16	5,800		1,305
Shiancoe	Dec. 1	3,800		589
Ward	Feb. 1	6,500		1,398

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

1.
Employee	Gross	Federal income	Social Secutiry	Medicare
	earnings	tax withheld	Tax Withheld	Tax Withheld
Arnett	37200	5208	2232	558
Cruz	16500	11880	990	248
Edwards	22100	3900	1326	332
Harvin	5200	3900	312	78
Nicks	66700	15660	4002	1001
Shiancoe	3800	7068	228	57
Ward	71500	16776	4290	1073

Working:

Employee	Date first	Period in months	Monthly	Gross
	employed	for the year	Salaries	Earnings
Arnett	Jan.2	12	3100	37200
Cruz	Oct.1	3	5500	16500
Edwards	Apr.16	8.5	2600	22100
Harvin	Nov.1	2	2600	5200
Nicks	Jan.16	11.5	5800	66700
Shiancoe	Dec.1	1	3800	3800
Ward	Feb.1	11	6500	71500

2.

a	13380
b	3345
c	354
d	3186
e	20265

Working:

Employee	Gross	Social Secutiry Tax	Medicare Tax	Federal	State
	earnings			Unemployent tax	Unemployent tax
Arnett	37200	2232	558	540	60
Cruz	16500	990	248	540	60
Edwards	22100	1326	332	540	60
Harvin	5200	312	78	281	31
Nicks	66700	4002	1001	540	60
Shiancoe	3800	228	57	205	23
Ward	71500	4290	1073	540	60
Total		13380	3345	3186	354