Deitz J.E., Southam J.L. Contemporary Business Mathematics for Colleges
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194 Part 3 Accounting Applications
Notes
Chapter 10 Payroll Records 195
Assignment 10.1: Payroll Problems
Name
Date Score
A (52 points) Complete the payroll. (1 point for each correct answer)
1. In this company, employees are paid times their regular rate for overtime hours between 40 and 48 and
2 times their regular rate for overtime hours over 48, per week.
1
1
2
1
Learning Objectives
2
Avila, Susan
Carter, Dale
Kula, Mary
Murphy, Tom
Norton, Alice
Payton, Alan
Perry, Lance
Polar, Barbara
Quinn, Carl
Reston, Sally
Sacco, Dom
Warren, Bill
TOTALS
49
40
50
45
40
35
47
41
49
40
50
44
9.00
8.00
10.00
9.00
8.80
8.00
8.00
9.00
8.80
8.80
9.50
10.00
$ 360.00
320.00
400.00
360.00
352.00
280.00
320.00
360.00
352.00
352.00
380.00
400.00
$4,236.00
$108.00
—
120.00
67.50
—
—
84.00
13.50
105.60
—
114.00
60.00
$672.60
$ 18.00
—
40.00
—
—
—
—
—
17.60
—
38.00
—
$113.60
$ 486.00
320.00
560.00
427.50
352.00
280.00
404.00
373.50
475.20
352.00
532.00
460.00
$5,022.20
40
40
40
40
40
35
40
40
40
40
40
40
8
—
8
5
—
—
7
1
8
—
8
4
1
—
2
—
—
—
—
—
1
—
2
—
Regular Earnings Time and a Half
Amount Hours Amount Hours Amount
Total
EarningsName
Total Hours
Regular Rate
Per Hour
Hours
Double Time
Score for A (52)
B (28 points) Solve the following problems. (7 points for each correct answer)
2. Mark Johnston is employed at a monthly salary of $2,980. How much is deducted from his monthly salary for
FICA taxes (Social Security and Medicare)?
$227.97
Social Security 5 $2,980 3 0.062 5 $184.76
Medicare 5 $2,980 3 0.0145 5 $43.21
Total FICA 5 $184.76 1 $43.21 5 $227.97
3. Joleen Dole is employed by a company that pays her $3,600 a month. She is single and claims one with-
holding allowance. What is her net pay after Social Security, Medicare, and federal income tax
withholding? Use the percentage method for federal income tax.
$2,838.98
Social Security 5 $3,600 3 0.062 5 $223.20
Medicare 5 $3,600 3 0.0145 5 $52.20
Income tax withholding: From single, monthly percentage table:
Gross earnings (monthly) $3,600.00 Withhold $354.70 plus 25% of excess over $2,793
Less one allowance monthly 2
283.33 $523.67 3 .25 5 $130.92 $354.70 1 $130.92 5 $485.62
Subject to withholding $3,316.67 $3,600 2 $223.20 2 $52.20 2 $485.62 5 $2,838.98 net pay
4. On April 1, the company in problem 3 changed its pay plan from monthly to weekly and began paying
Joleen $830.77 per week. What is her net weekly pay after Social Security, Medicare, and income tax
deductions? Use the percentage method.
$655.21
196 Part 3 Accounting Applications
Assignment 10.1 Continued
Social Security: $830.77 3 0.062 5 $51.51
Medicare: $830.77 3 0.0145 5 $12.05
Income tax withholding:
Gross earnings (weekly) $830.77
Less one allowance weekly 2
65.38
Subject to withholding $765.39
From percentage table:
Withhold $81.90 plus 25% of excess over
$645.00
$120.39 3 0.25 5 $ 30.10
1181.90
$112.00
$830.77 2 $51.51 2 $12.05 2 $112.00 5 $655.21 net pay
5. William Diggs is married and claims four withholding allowances. His weekly wages are $725. Calculate his
Social Security and Medicare deductions and, using the wage-bracket method, his federal income tax
withholding. Find his weekly net pay.
$637.54
Social Security: $725 3 0.062 5 $44.95
Medicare: $725 3 0.0145 5 $10.51
Income tax withholding:
wage-bracket method, married, 4 withholding allowances $32.00
$725.00 2 $44.95 2 $10.51 2 $32.00 5 $637.54 net pay
Score for B (28)
C (20 points) Compute and compare the federal income tax withholding amounts for each of the
following individuals using the percentage method and the wage-bracket method. (Follow the steps in
Section 10.2 for the percentage method.) (5 points for each correct difference)
6. Martha Gail: weekly wages, $412; single; 1 withholding allowance
Percentage method:
Wage-bracket method:
Difference:
7. George Wilson: weekly wages, $445; married; 3 withholding allowances
Percentage method:
Wage-bracket method:
Difference:
8. Fred Greys: weekly wages, $387; single; 2 withholding allowances
Percentage method:
Wage-bracket method:
Difference:
9. Josephine Creighton: weekly wages, $595; married; 1 withholding allowance
Percentage method:
Wage-bracket method:
Difference:
Score for C (20)
$ 0.41
$42.00
$41.59
$ 0.59
$23.00
$23.59
$ 0.51
$10.00
$ 9.49
$ 0.86
$38.00
$37.14
Chapter 10 Payroll Records 197
Assignment 10.2: Payroll, Earnings Record, Payroll Tax Returns
Name
Date Score
A (40 points) Solve the following problems. (1 point for each correct answer in the Total Wages column in 1;
2 points for each correct answer in the Net Pay column in 1 and 2)
1. Complete the following weekly payroll register. Workers receive overtime pay for any time worked in excess
of 40 hours per week at the rate of 1 1/2 their regular rate per hour. There is a 6.2% deduction for Social Se-
curity and a 1.45% deduction for Medicare taxes. Use the wage-bracket method for federal income tax
withholding. Be sure to use the correct table based on the marital status of each employee.
1
Learning Objectives
2 3 4 5
6
Baker, C.
Dillon, W.
Garcia, L.
Ingle, F.
Jung, S.
Kent, P.
Masters, T.
Ohm, R.
Valdez, M.
TOTALS
S
M
S
M
M
M
S
M
S
1
2
0
3
2
4
1
5
1
40
45
32
40
48
43
40
42
40
$14.80
15.00
13.50
15.00
12.40
14.80
10.60
14.28
12.50
5
8
4
2
$ 15.00
12.00
12.00
18.00
18.00
18.00
12.00
12.00
15.00
$132.00
Regular Earnings Overtime Earnings
Amount
Hours
Worked Amount
Total
Wages
Social
Security
Medi-
care
Fed.
Inc.
Tax
Med.
Ins. Total
Net
PayName
Marital Status
W/H Allow.
Total Hours
Rate
Per
Hour
Rate
Per
Hour
Deductions
$ 592.00
600.00
432.00
600.00
496.00
592.00
424.00
571.20
500.00
$4,807.20
$ 592.00
712.50
432.00
600.00
644.80
680.80
424.00
614.04
500.00
$5,200.14
$ 36.70
44.18
26.78
37.20
39.98
42.21
26.29
38.07
31.00
$322.41
$ 65.00
50.00
50.00
26.00
39.00
27.00
39.00
13.00
51.00
$360.00
$125.28
116.51
95.04
89.90
106.33
97.08
83.44
71.97
104.25
$889.80
$ 466.72
595.99
336.96
510.10
538.47
583.72
340.56
542.07
395.75
$4,310.34
$ 8.58
10.33
6.26
8.70
9.35
9.87
6.15
8.90
7.25
$75.39
22.50
18.60
22.20
21.42
112.50
148.80
88.80
42.84
$392.94
2. The total monthly wages of four employees are listed below. Determine the amount of the deductions and
the net pay due to each employee. Use 6.2% for Social Security and 1.45% for Medicare tax deductions,
and use the percentage method for federal income tax withholding. Determine the deductions and totals.
Ali, Kyber
Dawson, William
Henson, Gail
Johns, Mary
TOTALS
S
M
S
M
1
3
0
2
$1,750.00
2,100.00
2,820.00
2,665.00
$9,335.00
$1,460.37
1,881.05
2,242.82
2,310.38
$7,894.62
$108.50
130.20
174.84
165.23
$578.77
$155.75
58.30
361.45
150.75
$726.25
$ 289.63
218.95
577.18
354.62
$1,440.38
$ 25.38
30.45
40.89
38.64
$135.36
Total
Wages
Social
Security
Medicare
Federal
Income Tax Total
Net
PayName
W/H
Allow.
Marital
Status
Deductions
Score for A (40)
B (20 points) Solve the following problems. (1 point for each correct answer in the Net Pay column and
2 points for the correct Net Pay quarter total in 3; 1 point for each correct answer in 4)
3.
Complete the employee’s earnings record for Michelle Lee. Use 6.2% for Social Security and 1.45% for
Medicare taxes. Use the percentage method for federal income tax withholding.
198 Part 3 Accounting Applications
Assignment 10.2 Continued
1/6
1/13
1/20
1/27
2/3
2/10
2/17
2/24
3/3
3/10
3/17
3/24
3/31
$ 450.60
412.00
412.00
475.50
415.20
490.25
427.50
435.90
510.00
505.60
516.00
498.50
535.80
$6,084.85
$ 450.60
862.60
1,274.60
1,750.10
2,165.30
2,655.55
3,083.05
3,518.95
4,028.95
4,534.55
5,050.55
5,549.05
6,084.85
$ 4.00
4.00
4.00
4.00
4.00
4.00
4.00
4.00
4.00
4.00
4.00
4.00
4.00
$52.00
Name Social Security No.
Deductions
Medicare
Federal
Inc. Tax
United
Fund Total
Net
Pay
Period
Ending
Quarter
Totals
Cumulative
Wages
Total
Wages
Social
Security
Address
Michelle Lee
645 Abby Ln.
125-55-1254
2 Married
No. of Allowances Marital Status
$ 27.94
25.54
25.54
29.48
25.74
30.40
26.51
27.03
31.62
31.35
31.99
30.91
33.22
$377.27
$ 6.53
5.97
5.97
6.89
6.02
7.11
6.20
6.32
7.40
7.33
7.48
7.23
7.77
$88.22
$ 16.58
12.72
12.72
19.07
13.04
20.55
14.27
15.11
22.52
22.08
23.12
21.37
25.10
$238.25
$ 55.05
48.23
48.23
59.44
48.80
62.06
50.98
52.46
65.54
64.76
66.59
63.51
70.09
$755.74
$
395.55
363.77
363.77
416.06
366.40
428.19
376.52
383.44
444.46
440.84
449.41
434.99
465.71
$5,329.11
4. The following is a summary of quarterly earnings of a company’s employees. Determine the information
requested for the employer’s quarterly federal tax return.
Carter, M.
Davis, L.
Gordon, J.
McBride, C.
Taggert, L.
Walton, N.
TOTALS
$ 6,084.85
5,368.00
4,266.35
7,230.00
6,240.50
5,285.92
$34,475.62
$ 377.27
332.82
264.51
448.26
386.91
327.73
$2,137.50
$ 88.22
77.84
61.86
104.84
90.49
76.65
$499.90
$ 451.42
437.50
398.65
595.80
465.50
566.00
$2,914.87
Taxes Withheld
Medi-
care Fed. Inc. TaxName Total Wages
Social
Security
a. Total earnings paid b. Federal income tax withheld
c. Total Social Security tax paid d. Total Medicare tax paid
e. Total taxes withheld
Score for B (20)
$ 5,552.27
$ 499.90$ 2,137.50
$2,914.87$34,475.62
C (40 points) Solve the following problems. (4 points for each correct answer in 5 and 6; 1 point for each
correct answer in 7)
5.
The quarterly earnings of the employees of the Alpha Company are listed in the following table. Determine
the employee information needed for the employer’s quarterly federal tax return (Form 941).
Chapter 10 Payroll Records 199
Assignment 10.2 Continued
Caldwell, Janice
Dorman, J.A.
Eagie, T.W.
Fortune, Mark
Morris, Regina
Tracy, Joseph
TOTALS
$ 3,420.00
3,600.00
4,016.50
3,774.90
3,605.40
4,111.60
$22,528.40
$ 212.04
223.20
249.02
234.04
223.53
254.92
$1,396.75
$ 49.59
52.20
58.24
54.74
52.28
59.62
$326.67
$ 423.90
473.67
433.33
410.05
399.83
360.17
$2,500.95
Taxes Withheld
Medicare
Fed. Inc. TaxName Total Wages Social Security
a. Total earnings paid
b. Employee’s contribution of Social Security tax
c. Employee’s contribution of Medicare tax
d. Federal income tax withheld from wages
e. Total taxes withheld
6. The Primo Company had a total payroll of $148,600.34 for the first quarter of the current year. It withheld
$28,531.27 from the employees for federal income tax during this quarter. The company made the follow-
ing deposits in a qualified bank depository for the amount of the income and Social Security and Medicare
taxes withheld from the employees and for the company’s contribution to the FICA tax: $17,050 on Febru-
ary 6; $17,050 on March 4; and $17,050 on April 5. Primo Company’s bookkeeper is now filling out Form
941 (quarterly return), which is due by the end of April. Complete the following to determine the amount
of the check that the company must send to the IRS for the undeposited taxes due.
a. Total Social Security and Medicare taxes to be paid for quarter
b. Total taxes
c. Total deposits for quarter (sent to qualified bank depository)
d. Undeposited taxes due IRS
7. Jordan Mills employed Ruth Liebowitz for the period January 1 through March 31 (13 weeks) at a salary of
$1,500 per week. At the end of the first quarter of the year, how much in FUTA and SUTA taxes did the
company owe to the federal and state governments if the state had an 0.8% FUTA rate and a 5.4% SUTA rate?
a. Total wages and taxable wages b. FUTA tax
c. SUTA tax d. Total federal and state
unemployment taxes paid
Score for C (40)
$434
$378
$56$19,500 $7,000
$117.12
$51,150.00
$51,267.12
$22,735.85
$4,224.37
$2,500.95
$326.67
$1,396.75
$22,528.40
200 Part 3 Accounting Applications
Notes
Taxes
Chapter 11 Taxes 201
Learning Objectives
By studying this chapter and completing all assignments, you will be able to:
Compute sales taxes, using rate tables and percents.
Compute assessed valuations and property taxes based on
assessed valuation.
Compute tax rates in percents and mills.
Compute property tax payments involving special assessments,
prorations, and exemptions.
Make basic computations to determine taxable income for taxpayers
who use the standard federal income tax Form 1040.
Make basic computations to determine the tax liability for taxpayers
who use the standard federal income tax Form 1040.
11
1
Learning Objective
2
Learning Objective
3
Learning Objective
4
Learning Objective
5
Learning Objective
6
Learning Objective
Most retail businesses collect a sales tax from customers when a sale occurs. The tax
money must be turned over to the government. People and companies owning property
usually pay taxes on the property’s value. In this chapter we explain calculations
involving sales, property, and income taxes.
202 Part 3 Accounting Applications
A sales tax is a government levy, or charge, on retail sales of certain goods and services.
Most states and many cities and other local government entities levy sales taxes. State tax
rates—the percent used to compute the amount of sales tax—currently range from 3%
to 7%, and city and county rates range from 0.925% to 7%.
Retail sales taxes, which usually are a combination of state and local taxes, are
calculated as a single percent of taxable sales. For example, a sale is subject to a state sales
tax of 5% and a local sales tax of 1%. The combined rate of 6% is applied to all taxable
sales in that locality.
SALES TAX AS A PERCENT OF PRICE
Sales taxes generally are rounded to the nearest cent. For example, sales taxes of 4% and
5% on amounts of up to $1 are charged as shown in Figure 11-1.
Computing Sales Taxes
1
Learning Objective
Compute sales taxes, using rate
tables and percents.
4% on Sales of Tax Due 5% on Sales of Tax Due
$0.01 to $0.12 none $0.01 to $0.09 none
$0.13 to $0.37 $0.01 $0.10 to $0.29 $0.01
$0.38 to $0.62 $0.02 $0.30 to $0.49 $0.02
$0.63 to $0.87 $0.03 $0.50 to $0.69 $0.03
$0.88 to $1.00 $0.04 $0.70 to $0.89 $0.04
$0.90 to $1.00 $0.05
Figure 11-1 Sales Taxes
11.1 Some goods and services that
are frequently exempt from sales taxes
are food,pharmacy prescriptions,
and charges for installation and repair
labor.
to Compute Sales Tax and Total Sales Amount
1. Multiply the taxable sales amount by the tax rate.
2. Add the sales tax amount to the taxable sales amount to get the total
sales amount.
STEPS
EXAMPLE A
If taxable merchandise of $60.39 is sold in a state with a 5% sales tax, what are the
amount of tax and the total amount to be paid?
Amount of tax: $60.39 3 0.05 5 $3.0195, which rounds to $3.02
Total amount to be paid: $60.39 1 $3.02 5 $63.41
Most retail stores have cash registers that recognize a code such as the Uniform Product
Code (UPC) to determine taxable sales and to calculate the sales tax automatically. The
sales receipt usually shows the total taxable sales as a subtotal, the sales tax, and the total
sales plus tax. Usually, discounts on a sale are subtracted from the sale price before the tax
is figured. Shipping and installation labor charges are generally not taxed.
EXAMPLE B
A customer living in a city with a 6% state sales tax and a 1.5% city sales tax purchased a
refrigerator regularly priced at $850. He was given a 10% discount. Delivery charges were
$45. What were the amount of tax and the total cost to the buyer?
Discount amount: $850 3 10% 5 $850 3 0.10 5 $85
Price after discount: $850 2 $85 5 $765, or $850 3 0.90 5 $765
Sales tax: $765 3 (0.06 1 0.015) 5 $57.38
Cost to buyer: $765 1 $57.38 tax 1 $45 delivery 5 $867.38
State laws regarding the items subject to sales tax vary. Most states do not tax groceries;
however, most do tax meals served in restaurants. Certain nonfood items also sold in gro-
cery stores (such as laundry detergent) are generally taxed. When nontaxable and taxable
items are purchased together, the register usually computes the total price of items pur-
chased and automatically adds the correct amount of tax for each taxable item. The taxable
items are clearly marked on the register tape along with the total amount of tax charged.
EXAMPLE C
A customer living in a state in which the tax rate is 7% went to a grocery store and
purchased a quart of milk for $1.15, a loaf of bread for $2.79, potatoes for $2.25, and two
taxable items—laundry detergent for $8.49 and fabric softener for $5.30. What was her
total charge at the checkout counter?
Taxable items: $8.49 1 $5.30 5 $13.79
Tax: $13.79 3 0.07 5 $0.9653 5 $0.97
Total: $1.15 1 $2.79 1 $2.25 1 $8.49 1 $5.30 1 $0.97 5 $20.95
SALES TAX AS AN AMOUNT PER UNIT
All of the states and the District of Columbia levy special taxes on gasoline and
cigarettes, usually stated in cents per unit (gallon or pack). State taxes on gasoline vary
widely, from $0.075 in Georgia to $0.285 in Wisconsin; in addition, the federal tax is
currently $0.184 per gallon. State taxes on cigarettes currently range from $0.07 (South
Carolina) to $2.575 (New Jersey) per pack; the federal tax is currently $0.39 per pack.
EXCISE TAX AS AN AMOUNT PER UNIT
An excise tax is a tax assessed on each unit. In some states both the excise tax and the
general sales tax apply to items such as gasoline, cigarettes, and alcoholic beverages. In
such instances, the excise tax may be part of the taxable sales price for general sales tax
purposes. For example, in a certain locality gasoline costs $3.40 per gallon, plus state and
federal excise taxes of $0.48, and is subject to a general sales tax of 6%. The total price
per gallon is $4.11 ($3.40 1 $0.48 excise tax 1 $0.23 general sales tax). The general sales
tax is calculated as 6% of $3.88.
Chapter 11 Taxes 203
11.2 Taxes on purchases (sales and
excise taxes) fall into two distinct
categories:financial and social.
Financial sales taxes are those
designed to be borne equally by most
of the adult population,such as taxes
on food and general merchandise.
Social sales taxes target segments of
the population that use certain items,
such as cigarettes and alcohol.
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