PRAU5A1P1

PRACTICAL PROBLEMS • A

As we go to press, the federal income tax rates for 2014 are being determined by budget talks in Washington and not available for publication. For this edition, the 2013 federal income tax tables and 2013 FICA rates have been used.

4-1A LO 1.

Sean Matthews is a waiter at the Duluxe Lounge. In his first weekly pay in March, he earned $150.00 for the 40 hours he worked. In addition, he reports his tips for February to his employer ($500.00), and the employer withholds the appropriate taxes for the tips from this first pay in March.

Calculate his net take-home pay assuming the employer withheld federal income tax (wage-bracket, married, 2 allowances), social security taxes, and state income tax (2%).

4-3A LO 3.

Use (a) the percentage method and (b) the wage-bracket method to compute the federal income taxes to withhold from the wages or salaries of each employee.

4-4A LO 3.

Eaton Enterprises uses the wage-bracket method to determine federal income tax withholding on its employees.

Find the amount to withhold from the wages paid each employee.

4-11A LO 1.

George Clausen (age 48) is employed by Kline Company and is paid a salary of $42,640. He has just decided to join the company's Simple Retirement Account (IRA form) and has a few questions. Answer t:

4-5A LO 3.

The names of the employees of Hogan Thrift Shop are listed on the following payroll register. Employees are paid weekly. The marital status and the number of allowances claimed are shown on the payroll register, along with each employee's weekly salary, which has remained the same all year. Complete the payroll register for the payroll period ending December 19, the 51st weekly payday. The state income tax rate is 2% of total earnings, the city income tax rate is 1.5% of the total gross earnings, and the wage-bracket method is used for federal income taxes.

4-8A LO 3.

The names of the employees of Cox Security Systems and their regular salaries are shown in the following payroll register. Note that Hall and Short are paid monthly on the last payday, while all others are paid weekly.

In addition to the regular salaries, the company pays an annual bonus based on the amount of earnings for the year. For the current year, the bonus amounts to 8% of the annual salary paid to each employee. The bonus is to be paid along with the regular salaries on December 26, but the amount of the bonus and the amount of the regular salary will be shown separately on each employee's earnings statement. Assume that all employees received their regular salary during the entire year.

Prepare the payroll for the pay period ending December 26, showing the following for each employee:

• Use the wage-bracket method to withhold federal income tax from the regular salaries.

• Withhold a flat 25% on the annual bonus.

• Total salaries and bonuses are subject to a 2% state income tax and a 1 % city income tax.

Compute the employer's FICA taxes for the pay period ending December 26.

4-10A LO 3.

Mattola Company is giving each of its employees a holiday bonus of $100 on December 19 (a nonpayday). The company wants each employee's check to be $100. The supplemental tax percent is used.