Question

age 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	$3,600		$533
Cruz	Jan. 2	5,900		1,109
Edwards	Oct. 1	2,400		298
Harvin	Dec. 1	2,400		298
Nicks	Feb. 1	9,900		2,228
Shiancoe	Mar. 1	3,900		597
Ward	Nov. 16	8,900		1,922

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		5400	533	324	81
				(3600*1.5)
	Cruz	For 12 months		70800	1109	4248	1062
				(5900*12)
	Edwards	For 3 months		7200	298	432	108
				(2400*3)
	Harvin	For 1 month		2400	298	144	36
				(2400*1)
	Nicks	For 11 months		108900	2228	6534	1633.5
				(9900*11)
	Shiancoe	For 10 months		39000	597	2340	585
				(3900*10)
	Ward	For 1.5 months		13350	1922	801	200.25
				(8900*1.5)
	Total			247050	6985	14823	3705.75
2
(a)	Social security tax= $14823 (refer previous table)
(b)	Medicare tax= $ 3705.75 (refer previous table)
c	State unemployment compensation-5.4% on first $10000
	Employee	Gross earnings	If >10000 restricted to $10000	State unemployment compensation @ 5.4%
			a	a*5.4%
	Arnett	5400	5400	291.6
	Cruz	70800	10000	540
	Edwards	7200	7200	388.8
	Harvin	2400	2400	129.6
	Nicks	108900	10000	540
	Shiancoe	39000	10000	540
	Ward	13350	10000	540
	Total	247050		2970
(d)	Federal unemployment compensation-0.8% on first $10000
	Employee	Gross earnings	If >10000 restricted to $10000	Federal unemployment compensation @ 0.8%
	Arnett	5400	5400	43.2
	Cruz	70800	10000	80
	Edwards	7200	7200	57.6
	Harvin	2400	2400	19.2
	Nicks	108900	10000	80
	Shiancoe	39000	10000	80
	Ward	13350	10000	80
	Total	247050		440
e	Total=14823+3705.75+2970+440=$ 21938.75