PRAU4P1REDO

Unit 4 [122: Payroll Accounting]

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Script

Welcome to your Unit 4 Homework Assistance video. In the class, you are assigned exercises for each chapter. In this video, you will be reviewing a sample problem that will assist you as an example of how to approach your homework. Chapter 3 identifies the persons that are covered under the law for social security purposes and identifies the types of compensation that are defined as wages. You will look at how to apply the current tax rates and learn what the current wage base is for FICA.

For the current year if someone meets the definition of an employee, and their compensation meets the definition of wages, then they are covered under FICA and will have FICA taxes deducted from their pay. FICA is made up of two different taxes on employees and employers. OASDI (Old Age Survivors and Disability Insurance) and HI (Medicare). For 2014 the OASDI rate is 6.2% on the first $113,700 of wages (this is the 2013 tax rate used in text) with a maximum tax of $7,049.40. For 2014 the HI rate is 1.45% on all wages without no maximum.

For this chapter, you will look at Practical Problem 3-1B. In this problem, you are given the biweekly taxable wages for the employees. In this problem, you will be computing the FICA taxes for each employee and the employer’s FICA taxes

FICA Taxes Employee

No. Employee

Name Biweekly

Taxable Wages OASDI HI

711 Adams, Jane 631.24 512 Candy, James 892.00 624 Guiterrez, Roberta 499.75 325 Harrison, Ken 1,250.00 422 Lowland, Harriet 1,600.00 210 Ranger, Ralph 975.50 111 Sweat, Rudy 819.45

Totals 6,667.94

Employers OASDI-Total Taxable wages ___________

Employer’s OASDI Tax _________

Employers HI Tax-Total Taxable wages ___________

Employer’s HI Tax ____________

To calculate the OASDI for each employee you take the Biweekly Taxable Wages and multiply by 6.2% (0.0620). Round your answer to two (2) decimal places.

To calculate the HI for each employee you take the Biweekly Taxable Wages and multiply by 1.45% (0.0145). Round your answer to two (2) decimal places.

Unit 4 [122: Payroll Accounting]

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For the first employee, Adams, OASDI is 631.24 x 6.2%=39.13688 which is 39.14 rounded and the HI is 631.24 x 1.45%=9.15298 which is 9.15 rounded

For Candy, OASDI is 892.00 x 6.2%= 55.304 which is 55.30 rounded and the HI is 892.00 x 1.45%=12.934 which is 12.93 rounded

For Guiterrez, OASDI is 499.75 x 6.2%= 30.9845 which is 30.98 rounded and the HI is 499.75 x 1.45%=7.246375 which is 7.25 rounded

For Harrison, OASDI is 1250 x 6.2%= 77.50 which is 77.50 rounded and the HI is 1250.00 x 1.45%=18.125 which is 18.13 rounded

For Lowland, OASDI is 1600.00 x 6.2%= 99.20 which is 99.20 rounded and the HI is 1600.00 x 1.45%=23.20 which is 23.20 rounded

For Ranger, OASDI is 975.50 x 6.2%= 60.481 which is 60.48 rounded and the HI is 975.50 x 1.45%=14.14475 which is 14.14 rounded

For Sweat, OASDI is 819.45 x 6.2%= 50.8059 which is 50.81 rounded and the HI is 819.45 x 1.45%=11.882025 which is 11.88 rounded

For the Employer OASDI and HI you take the total taxable wages of 6,667.94 and multiply by the applicable percentages. For the OASDI, 6,667.94 x 6.2%=413.41228 which is 413.41 rounded. The HI is 6,667.94 x 1.45%=96.68513 which is 96.69 rounded

The completed problem looks like this:

FICA Taxes Employee

No. Employee

Name Biweekly

Taxable Wages OASDI HI

711 Adams, Jane 631.24 39.14 9.15 512 Candy, James 892.00 55.30 12.93 624 Guiterrez, Roberta 499.75 30398 7.25 325 Harrison, Ken 1,250.00 77.50 18.13 422 Lowland, Harriet 1,600.00 99.20 23.20 210 Ranger, Ralph 975.50 60.48 14.14 111 Sweat, Rudy 819.45 50.81 11.88

Totals 6,667.94 413.41 96.68

Employers OASDI-Total Taxable wages $6,667.91

Employer’s OASDI Tax $413.41

Employers HI Tax-Total Taxable wages $6,667.91

Employer’s HI Tax $96.69