Question

o pay an employee total compensation of $140,000, which includes $120,000 of salary, $5,000 of taxable fringe benefits, and $15,000 of nontaxable fringe benefits. Also, assume that the employer’s tax rate is 21%. What is the after-tax cost to the employer for paying this compensation to the employee, for income tax purposes only?

$140,000

$110,600

$98,750

$120,000

Answer 1

DETAILS GIVEN IN QUESTION:

EMPLOYEE COMPENSATION EXPENSE & TAX RATE 21% IS GIVEN. TO FIND WHAT IS AFTER TAX COST TO THE EMPLOYER.

ANSWER:

SALARY	120,000
TAXABLE FRINGE BENEFIT	5,000
NON TAXABLE FRINGE BENEFIT	15,000
TOTAL COMPENSATION	140,000
(-) TAX @ 21 %	29,400
AFTER TAX COST	110,600

HENCE, ANSWER IS $ 110,600.