Questions: Required information [The following information applies to the questions displayed below.] BMX Company has one employee. FICA Social Security taxes are 6.2% of the first 137,700 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first 7,000 paid to its employee. Gross Pay through August 31 Gross Pay for September --------- a. 5,300 2,600 b. 2,800 2,900 c. 132,200 8,800 Compute BMX's amounts for each of these four taxes as applied to the employee's gross earnings for September under each of three separate situations (a), (b), and (c). Note: Round your answers to 2 decimal places.

Required information
[The following information applies to the questions displayed below.]
BMX Company has one employee. FICA Social Security taxes are 6.2% of the first 137,700 paid to its employee, and FICA Medicare taxes are 1.45% of gross pay. For BMX, its FUTA taxes are 0.6% and SUTA taxes are 5.4% of the first 7,000 paid to its employee.

Gross Pay through August 31 Gross Pay for September
---------
a. 5,300 2,600
b. 2,800 2,900
c. 132,200 8,800

Compute BMX's amounts for each of these four taxes as applied to the employee's gross earnings for September under each of three separate situations (a), (b), and (c).
Note: Round your answers to 2 decimal places.

Transcript text: Required information [The following information applies to the questions displayed below.] BMX Company has one employee. FICA Social Security taxes are $6.2 \%$ of the first $\$ 137,700$ paid to its employee, and FICA Medicare taxes are $1.45 \%$ of gross pay. For BMX, its FUTA taxes are $0.6 \%$ and SUTA taxes are $5.4 \%$ of the first $\$ 7,000$ paid to its employee. \begin{tabular}{|c|c|c|} \hline & Gross Pay through August 31 & Gross Pay for September \\ \hline a. & $\$ 5,300$ & \$ 2,600 \\ \hline b. & 2,800 & 2,900 \\ \hline c. & 132,200 & 8,800 \\ \hline \end{tabular} Compute BMX's amounts for each of these four taxes as applied to the employee's gross earnings for September under each of three separate situations (a), (b), and (c). Note: Round your answers to 2 decimal places.

Solution

Solution Steps

To compute the taxes for each situation, we need to follow these steps:

FICA Social Security Tax: Calculate 6.2% of the September pay, but only if the total pay (including previous months) does not exceed $137,700. If it does, calculate only on the remaining amount up to $137,700.
FICA Medicare Tax: Calculate 1.45% of the September pay, as there is no cap on Medicare taxes.
FUTA Tax: Calculate 0.6% of the September pay, but only if the total pay (including previous months) does not exceed $7,000. If it does, calculate only on the remaining amount up to $7,000.
SUTA Tax: Calculate 5.4% of the September pay, but only if the total pay (including previous months) does not exceed $7,000. If it does, calculate only on the remaining amount up to $7,000.

Step 1: Calculate FICA Social Security Tax for Situation (a)

For gross pay through August of $ \$5,300 $ and September of $ \$2,600 $:

Total gross pay = $ 5300 + 2600 = 7900 $
Since $ 7900 < 137700 $, the FICA Social Security Tax is calculated as: \[ \text{Social Security Tax} = 2600 \times 0.062 = 161.2 \]

Step 2: Calculate FICA Medicare Tax for Situation (a)

The FICA Medicare Tax is calculated as: \[ \text{Medicare Tax} = 2600 \times 0.0145 = 37.7 \]

Step 3: Calculate FUTA Tax for Situation (a)

For FUTA Tax:

Since $ 7900 < 7000 $, the FUTA Tax is calculated as: \[ \text{FUTA Tax} = 2600 \times 0.006 = 10.2 \]

Step 4: Calculate SUTA Tax for Situation (a)

For SUTA Tax:

Since $ 7900 < 7000 $, the SUTA Tax is calculated as: \[ \text{SUTA Tax} = 2600 \times 0.054 = 91.8 \]

Step 5: Calculate Taxes for Situation (b)

For gross pay through August of $ \$2,800 $ and September of $ \$2,900 $:

Total gross pay = $ 2800 + 2900 = 5700 $
FICA Social Security Tax: \[ \text{Social Security Tax} = 2900 \times 0.062 = 179.8 \]
FICA Medicare Tax: \[ \text{Medicare Tax} = 2900 \times 0.0145 = 42.05 \]
FUTA Tax: \[ \text{FUTA Tax} = 2900 \times 0.006 = 17.4 \]
SUTA Tax: \[ \text{SUTA Tax} = 2900 \times 0.054 = 156.6 \]

Step 6: Calculate Taxes for Situation (c)

For gross pay through August of $ \$132,200 $ and September of $ \$8,800 $:

Total gross pay = $ 132200 + 8800 = 141000 $
FICA Social Security Tax: \[ \text{Social Security Tax} = (137700 - 132200) \times 0.062 = 341.0 \]
FICA Medicare Tax: \[ \text{Medicare Tax} = 8800 \times 0.0145 = 127.6 \]
FUTA Tax: \[ \text{FUTA Tax} = 0 \quad (\text{since } 141000 > 7000) \]
SUTA Tax: \[ \text{SUTA Tax} = 0 \quad (\text{since } 141000 > 7000) \]

Final Answer

For Situation (a):

Social Security Tax: $ 161.2 $
Medicare Tax: $ 37.7 $
FUTA Tax: $ 10.2 $
SUTA Tax: $ 91.8 $

For Situation (b):

Social Security Tax: $ 179.8 $
Medicare Tax: $ 42.05 $
FUTA Tax: $ 17.4 $
SUTA Tax: $ 156.6 $

For Situation (c):

Social Security Tax: $ 341.0 $
Medicare Tax: $ 127.6 $
FUTA Tax: $ 0 $
SUTA Tax: $ 0 $

Thus, the final answers are: \[ \boxed{ \begin{align_} \text{(a)} & \quad \text{Social Security Tax: } 161.2, \text{ Medicare Tax: } 37.7, \text{ FUTA Tax: } 10.2, \text{ SUTA Tax: } 91.8 \\ \text{(b)} & \quad \text{Social Security Tax: } 179.8, \text{ Medicare Tax: } 42.05, \text{ FUTA Tax: } 17.4, \text{ SUTA Tax: } 156.6 \\ \text{(c)} & \quad \text{Social Security Tax: } 341.0, \text{ Medicare Tax: } 127.6, \text{ FUTA Tax: } 0, \text{ SUTA Tax: } 0 \end{align_} } \]

Was this solution helpful?

Unhelpful

Helpful

Questions asked by other users

< Previous Next >

Thank you for your feedback.

Copied!