List the required employee payroll withholding deductions, and provide the tax rate for each.
Requited employee payroll withhold deduction is a required deduction imposed by the government. This includes income tax, social security tax, etc.
Employee payroll withheld deductions are the difference between the gross pay and net pay. From the gross pay, the employer withheld some amount and pays the rest to the employee. The withheld amount becomes the liability for the emp0loyer that is paid to a third party within the stipulated time.
There are two kinds of Employee payroll withholding deductions –
a) Required deductions: - imposed by federal or state government
b) Optional deductions: - These deductions are withheld at the employer’s request
Some of the required withheld deductions with their rates are as follow –
a) Income tax withholding –this is the deduction imposed by the federal government. Generally, this rate is around 30% in the U.S.
b) OASDI Tax – this is a kind of social security tax for old age, survivors, and disability insurance. Current this tax rate is 6.2%.
c) Medicare tax – this provides health insurance to individuals based on age or disability. At current, this rate is 1.45%.
Theodore Simpson works for Blair Company all year and earns a monthly salary of $4,000. There is no overtime pay.
Based on Theodore’s W-4, Blair withholds income taxes at 15% of his gross pay. As of July 31, Theodore had $28,000 ofcumulative earnings.
Journalize the accrual of salary expense for Blair Company related to the employment of Theodore Simpson for the month ofAugust.
The income statement for California Communications follows. Assume California Communications signed a 3-month, 9%, $3,000 note on June 1, 2018, and that this was the only note payable for the company.
Year Ended July 31, 2018
Net Sales Revenue
Cost of Goods Sold
Total Operating Expenses
Other Income and (Expenses):
Total Other Income and (Expenses)
Net Income before Income Tax Expense
Income Tax Expense
1. Fill in the missing information for California’s year ended July 31, 2018, income statement. Round to the nearest dollar.
2. Compute the times-interest-earned ratio for the company. Round to two decimals.
Rios Raft Company had the following liabilities.
a. Accounts Payable
b. Note Payable due in 3 years
c. Salaries Payable
d. Note Payable due in 6 months
e. Sales Tax Payable
f. Unearned Revenue due in 8 months
g. Income Tax Payable
Determine whether each liability would be considered a current liability (CL) or a long-term liability (LTL).
Hugh Stanley manages a Dairy House drive-in. His straight-time pay is $12 per hour, with time-and-a-half for hours in excess of 40 per week. Stanley’s payroll deductions include withheld income tax of 20%, FICA tax, and a weekly deduction of $5 for a charitable contribution to United Way. Stanley worked 58 hours during the week.
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