Exercise 9-11B Calculating employee and employer payroll taxes

Accounting for Current Liabilities and Payroll

Exercise 9-11B Calculating employee and employer payroll taxes

Culver Co. employed Jen Sing in Year 1. Jen earned $5,200 per month and worked the entire year. Assume the Social Security tax rate is 6 percent on the first $110,000 of earnings, and the Medicare tax rate is 1.5 percent. Jen’s federal income tax withholding amount is $800 per month. Use 6.0 percent for the unemployment tax rate for the first $7,000 of earnings per employee.

Required
a. Answer the following questions:
(1) What is Jen’s net pay per month?
(2) What amount does Jen pay monthly in FICA payroll taxes?
(3) What is the total payroll tax expense for Culver Co. for January Year 1? February Year 1? March Year 1? December Year 1?

b. Assume that instead of $5,200 per month, Jen earned $10,000 per month. Answer the questions in Requirement a.

Exercise 9-12B Fringe benefits and payroll expense

The two employees at Oswald Co. receive various fringe benefits. Oswald Co. provides vacation at the rate of $500 per day, and each employee earns one day of vacation per month worked. In addition, Oswald Co. pays a total amount of $780 per month in medical insurance premiums. Oswald also contributes a total amount of $400 per month into an employee retirement plan. The federal unemployment tax rate is 6%, while the state unemployment rate is 4.5%. Unemployment taxes apply to the first $7,000 of earnings per employee. Assume a Social Security tax rate of 6.0% and a Medicare tax rate of 1.5%.

Required
a. Prepare the computation for the accrued fringe benefits per month.
b. Show the effect of accrued fringe benefits per month on a statements model like the one shown next:
c. If the two employees each worked 250 days for the year, what is Oswald Co.’s total payroll cost (salary, payroll taxes, and fringe benefits) for the year? (Assume that each employee earns $500 per day.)