Question

The payroll of Grich Company for September 2014 is as follows. Total payroll was $486,000, of which $122,000 is exempt from Social Security tax because it represented amounts paid in excess of $128,400 to certain employees. The amount paid to employees in excess of $7,000 was $414,000. Income taxes in the amount of $85,000 were withheld, as was $8,800 in union dues. The state unemployment tax is 3.5%, but Grich Company is allowed a credit of 2.3% by the state for its unemployment experience. Also, assume that the current F.I.C.A. tax is 7.65% on an employee's wage to $128,400 and 1.45% in excess of $128,400. No employee for Grich Company makes more than $125,000. The federal unemployment tax rate is 0.8% after state credit.

Q. The amount of the taxes (income taxes, social security taxes, medicare taxes, unemployment taxes) to be paid by the employees of Grich for September 2014 salaries is

a. below $90,000

b. between $110,000 through $90,000

c. between $120,000 through $110,000.01

d. larger than $120,000

Q. Grich's payroll tax expense for September 2014 is

a. below $30,000

b. between $30,000.01 and $30,500

c. between $30,500.01 and $31,100

d. above $31,100

Answer 1

Solution:- Amount of taxes

Salaries and Wages	486000
Withholding taxes payable		85,000
FICA taxes payable ((486,000-122,000)*7.65%+122,000*1.45%)		29,615
union dues payable		8,800
Cash (balancing Figure)		362,585

Total amount of tax =85,000+29,615+8,800 = $ 123,415 so the correct option is option D i.e Larger than $120,000

(b)

Payroll tax expenses	31,211
FICA taxes payable		29615
federal unemployment tax (486,000-414,000)*0.8%		576
state unemployment tax (85,000*(3.5% -2.3%)		1020

So the correct option is Option B ie payroll tax expenses is between $30,000 and $30,500