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Chapter 9: Q9E (page 431)

Mest Company has 9 employees. FICA Social Security taxes are 6.2% of the first \(118,500 paid to eachemployee, and FICA Medicare taxes are 1.45% of gross pay. FUTA taxes are 0.6% and SUTA taxes are5.4% of the first \)7,000 paid to each employee. Cumulative pay for the current year for each of its employees

follows.

Employee Cumulative Pay Employee Cumulative Pay Employee Cumulative Pay

Ken S. . \( 6,000 Michael M. \)143,500 Lori K. $121,000

Tim V. . 60,200 Erin C. . 106,900 Kitty O. 36,900

Steve S. . 87,000 Kyle B. . 118,500 John W. . 4,000

a. Prepare a table with the following six column headings. Compute the amounts in this table for each employee and then total the numerical columns.

Pay Subject to Pay Subject Pay Subject Pay Subject

Cumulative FICA Social to FICA to FUTA to SUTA

Employee Pay Security Medicare Taxes Taxes

b. For the company, compute each total for: FICA Social Security taxes, FICA Medicare taxes, FUTA taxes, and SUTA taxes. (Hint:Remember to include in those totals any employee share of taxes that the company must collect.) (Round amounts to cents.)

Short Answer

Expert verified

The total of the FICA social security taxes is $42,408.

Step by step solution

01

Definition of the SUTA

SUTA is a tax that is deducted by the state government for unemployment. The amount of the SUTA is paid by the employers on the behalf of the employees. This amount is used to cover the cost of unemployment insurance.

02

Preparation of table

Pay Subject to

Pay Subject to

Pay Subject to

Pay Subject to

Cumulative

FICA Social

FICA

FUTA

SUTA

Employee

Pay

Security

Medicare

Taxes

Taxes

Ken S.

$6,000

$6,000

$6,000

$6,000

$6,000

Tim V.

$60,200

$60,200

$60,200

$7,000

$7,000

Steve S.

$87,000

$87,000

$87,000

$7,000

$7,000

Michael M.

$143,500

$143,500

$143,500

$7,000

$7,000

Erin C.

$106,900

$106,900

$106,900

$7,000

$7,000

Kyle B.

$118,500

$118,500

$118,500

$7,000

$7,000

Lori K.

$121,000

$121,000

$121,000

$7,000

$7,000

Kitty O.

$36,900

$36,900

$36,900

$7,000

$7,000

John W.

$4,000

$4,000

$4,000

$4,000

$4,000

Totals

$684,000

$684,000

$684,000

$59,000

$59,000

03

Computation of total taxes

Tax Paid by Employee

Tax Paid by Employer

FICA- Social Security Tax

$42,408

$42,408

FICA- Medicare Tax

$9,918

$9,918

FUTA Taxes

$0

$354

SUTA Taxes

$0

$3,186

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Most popular questions from this chapter

Hitzu Co. sold a copier costing \(4,800 with a two-year parts warranty to a customer on August 16, 2017,for \)6,000 cash. Hitzu uses the perpetual inventory system. On November 22, 2018, the copier requireson-site repairs that are completed the same day. The repairs cost $209 for materials taken from the repairparts inventory. These are the only repairs required in 2018 for this copier. Based on experience, Hitzuexpects to incur warranty costs equal to 4% of dollar sales. It records warranty expense with an adjustingentry at the end of each year.

1. How much warranty expense does the company report in 2017 for this copier?

2. How much is the estimated warranty liability for this copier as of December 31, 2017?

3. How much warranty expense does the company report in 2018 for this copier?

4. How much is the estimated warranty liability for this copier as of December 31, 2018?

5. Prepare journal entries to record (a) the copier’s sale; (b) the adjustment on December 31, 2017, torecognize the warranty expense; and (c) the repairs that occur in November 2018.

Question On January 8, the end of the first weekly pay period of the year, Regis Company’s payroll register showed

that its employees earned \(22,760 of office salaries and \)65,840 of sales salaries. Withholdings from the

employees’ salaries include FICA Social Security taxes at the rate of 6.2%, FICA Medicare taxes at the

rate of 1.45%, \(12,860 of federal income taxes, \)1,340 of medical insurance deductions, and \(840 of

union dues. No employee earned more than \)7,000 in this first period.

Required

1. Calculate FICA Social Security taxes payable and FICA Medicare taxes payable. Prepare the journal

entry to record Regis Company’s January 8 (employee) payroll expenses and liabilities. (Round

amounts to cents.)

2. Prepare the journal entry to record Regis’s (employer) payroll taxes resulting from the January 8 payroll.

Regis’s merit rating reduces its state unemployment tax rate to 4% of the first $7,000 paid each

employee. The federal unemployment tax rate is 0.6%. (Round amounts to cents.)

What is the combined amount (in percent) of the employee and employer Social Security tax rate? (Assume wages do not exceed $118,500 per year.)

Refer to Samsung’s recent balance sheet in Appendix A. What current liabilities related to income taxes are on its balance sheet? Explain the meaning of each income tax account identified.

Question: Dusty Johnson is the accounting and finance manager for a manufacturer. At year-end, he must determine how to account for the company’s contingencies. His manager, Tom Pretti, objects to Johnson’s proposal to recognize an expense and a liability for warranty service on units of a new product introduced in the fourth quarter. Pretti comments, “There’s no way we can estimate this warranty cost. We don’t owe anyone anything until a product fails and it is returned. Let’s report an expense if and when we do any warranty work.”

Required

Prepare a one-page memorandum for Johnson to send to Pretti defending his proposal.
See all solutions

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