Journalizing - Payroll Acct Mod 7

5–2A. Earnings subject to FUTA and SUTA:

$737,910 – $472,120= $265,790

(a) Net FUTA tax $265,790 × 0.006 = 1,594.74

(b) Net SUTA tax $265,790 × 0.029 = 7,707.91

5–4A. (a) SUTA taxes paid to Vermont $18,000 × 0.04 = $720.00

(b) SUTA taxes paid to New Hampshire $24,000 × 0.0265 = $636.00

(d) FUTA taxes paid $103,500 × 0.006 = $621.00

5–6A. (a) FUTA taxable wages:

Total wages $ 177,610

Less: Director’s salary (900)

Less: Nontaxable portion of president’s and vice

president’s salaries (21,000)

Less: Pretax cafeteria plan contributions (2,000)

Taxable wages $ 153,710

Net FUTA tax: $153,710 × 0.006 $ 922.26

(b) SUTA taxable wages:

Total wages $ 177,610

Less: Director’s salary (900)

Less: Nontaxable portion of president’s and vice

president’s salaries [($20,000 – $7,000) + ($15,000

– $7,000)] (21,000)

Less: Pretax cafeteria plan contributions (2,000)

Taxable wages $ 153,710

SUTA tax: $153,710 × 0.035 $5,379.85

During 2014 Jeff Smallwood worked for two different employers. Until May, he worked for Rowland Construction Co. In Ames Iowa, and earned $22,000. The state unemployment rate for Rowland is 4.6%. He then changed jobs and worked for Ford Improvement Co. In Topeka Kansas, and earned $29,500 for the rest of the year. The state unemployment rate for Ford is 5.1%. Determine the unemployment taxes (FUTA and SUTA) that would be paid by:

Rowland

5–8A. (a) FUTA tax $X,XXX × X.XXX = $ XX.XX

SUTA tax $XX,XXX × X.XXX = X,XXX.XX

Ford Improvement Total = $X,XXX.XX

(b) FUTA tax $X,XXX × X.XXX = $ XX.XX

SUTA tax $X,XXX × X.XXX = XXX.XX

Total = $XXX.XX

Peroni Co. paid wages of $170,900 this year. Of this amount, $114,000 was taxable for net FUTA and SUTA purposes. The state’s contribution tax rate is 3.1% for Peroni Co. Due to cash flow problems, the company did not make any SUTA payments until after the Form 940 filing date. Compute

5–10A. (a) $114,000 × 0.031 × 90% $X,XXX.XX

$114,000 × 0.023 (additional credit to 5.4%) X,XXX.XX

Total FUTA tax credit $X,XXX.XX

(b) $114,000 × 0.060 $ X,XXX.XX

Less: Credit against tax [see (a) above] (X,XXX.XX)

Net FUTA tax $ X,XXX.XX

FUTA tax without penalty: $114,000 × 0.006 XXX.XX

Penalty $ XXX.XX

Reserve ratio Contribution Rate

0.0% or more but less than 1.0% 6.7%

1.0% or more but less than 1.2% 6.4%

1.2% or more but less than 1.4% 6.1%

1.4% or more but less than 1.6% 5.8%

1.6 or more but less than 1.8% 5.5%

1.8% or more but less than 2.0% 5.2%

2.0% or more but less than 2.2% 4.9%

2.2% or more but less than 2.4% 4.6%

2.4% or more but less than 2.6% 4.3%

2.6% or more but less than 2.8% 4.0%

2.8% or more but less than 3.0% 3.7%

3.0% or more but less than 3.2% 3.4%

3.2% or more 3.1%

Hyram Co. which is located in State A had an average payroll of $850,000 for the three 12 month periods ending on June 30, 2013 (computation date for the tax year 2014). As of June 30, 2013, the total contributions that had been made to Hyram Company’s reserve account, in excess of the benefits charged amounted to $17,440. Compute:

5–12A. (a) Hyram’s reserve ratio for 2013 $17,440 ÷ $850,000 = 2.05%

(b) 2014 contribution rate for the company is 4.9%

(c) Smallest contribution that the company can make in order to reduce its tax rate if State A permits voluntary contributions

Balance needed to qualify for 4.6% rate: $850,000 × 0.022 =$ 18,700

Less: Actual balance 17,440

Contribution needed $ 1,260

Tax savings realized by the company, taking into consideration made in (c) if the taxable payroll in 2014 is $980,000

(d) Tax without voluntary contribution $XXX,XXX × X.XXX = $ 48,020

Tax with voluntary contribution $XXX,XXX × X.XXX = 45,080

Tax decrease resulting from voluntary contribution $ 2,940 Less: Amount of voluntary contribution X,XXX

Tax savings realized $ 1,680

Marlene Grady and Pauline Monroe are partners engaged in operating The G&M Doll shop which has employed the following persons since the beginning of the year. Grady and Monroe are each paid a weekly salary allowance of $950. The doll shop is located in a state that requires unemployment compensation contribution of employers of one or more individuals. The company is subject to state contributions at a rate of 3.1% for wages not in excess of $8100. Compute each of the following amounts based upon the 41st weekly payroll period for the week ending October 10, 2014:

5–14A. (a) Taxable OASDI HI

Earnings (6.2%) (1.45%)

V. Hoffman $392.31 $24.32 $ 5.69

A. Drugan 288.46 17.88 4.18

G. Beiter 180.00 11.16 2.6

S. Egan 220.00 13.64 3.19

B. Lin 160.00 9.92 2.32

Grady and Monroe (partners are not taxed under FICA)

(b) Taxable payroll: $1,240.77

OASDI $1,240.77 × 0.062 = 76.93

HI $1,240.77 × 0.0145 = 17.99

G. Beiter $ 180

B. Lin 160

$ 340

SUTA tax $340 × 0.031 = $10.54

(d) Taxable earnings:

B. Lin $ 160

Net FUTA tax $160 × 0.006 = $0.96

The remaining employees are beyond the $7,000 limit; therefore,

there is no FUTA tax on their salaries.

(e) FICA $94.90

SUTA 10.54

Net FUTA 0.96

Total payroll taxes $106.42