Unemployment Comp - Payroll Accounting

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 $XX,XXX ÷ $XXX,XXX =

                (b)   2014 contribution rate for the company _______ %

                (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: $XXX,XXX × X.XXX=$XX,XXX

                        Less: Actual balance................................................................                XX,XXX

                        Contribution needed................................................................                $X,XXX

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     =        $XX,XXX

                        Tax with voluntary contribution.......... $XXX,XXX × X.XXX     =        XX,XXX

                        Tax decrease resulting from voluntary contribution...........                $X,XXX

                        Less: Amount of voluntary contribution................................                   X,XXX

                        Tax savings realized................................................................                $X,XXX