Question

Wage 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	$3,800		$562
Cruz	Jan. 2	5,200		978
Edwards	Oct. 1	2,200		273
Harvin	Dec. 1	2,300		285
Nicks	Feb. 1	10,500		2,363
Shiancoe	Mar. 1	3,600		551
Ward	Nov. 16	8,300		1,793

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	Gross Earnings	Federal Income Tax Withheld	Social Security Tax Withheld	Medicare Tax Withheld
Arnett	5700	843	342.00	85.50
Cruz	62400	11736	3744.00	936.00
Edwards	6600	819	396.00	99.00
Harvin	2300	285	138.00	34.50
Nicks	115500	25993	6930.00	1732.50
Shiancoe	36000	5510	2160.00	540.00
Ward	12450	2690	747.00	186.75
Total			14457.00	3614.25

2.

(a) Social security	14457.00
(b) Medicare	3614.25
(c) State unemployment	2948.40
(d) Federal unemployment	436.80
(e) Total	21456.45

Working:

(c) State unemployment = 5.4% x ($5700 + $10000 + $6600 + $2300 + $10000 + $10000 + $10000) = 5.4% x $54600 = $2948.40

(d) Federal unemployment = 0.8% x $54600 = $436.80