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# Computing Payroll Taxes

1- Timmons Co., which has a taxable payroll of \$500,000, is subject to FUTA tax of 6.2% and a state contribution rate of 5.4%. However, because of stable employment experience, the company's state rate has been reduced to 2%. What is the total amount of federal and state unemployment tax for Timmons Co.?
a. \$58,500
b. \$41,000
c. \$20,000
d. \$14,000
e. none of the above

2- The total payroll of Waters Company for the month of October, 2007 was \$360,000, of which \$90,000 represented amounts paid in excess of \$90,000 to certain employees. \$300,000 represented amounts paid to employees in excess of the \$7,000 maximum subject to unemployment taxes. \$90,000 of federal income taxes and \$9,000 of union dues were withheld. The state unemployment tax is 1%, the federal unemployment tax is .8%, and the current F.I.C.A. tax is 7.65% on an employee's wages to \$90,000 and 1.45% in excess of \$90,000. What amount should Waters record as payroll tax expense?
a. \$118,620.
b. \$113,040.
c. \$23,040.
d. \$28,440.
e. none of the above

#### Solution Preview

1. Timmons total unemployment tax follows:

Federal: \$500,000*.008=\$ 4,000 (Because state payments are made, the 6.2% rate is credited 5.4%)
State: \$500,000*.02 = ...

#### Solution Summary

This solution describes the procedures for computing a company's federal unemployment and FICA, as well as its state unemployment, tax liabilities.

\$2.19