Payroll problem. The facts and instructions are listed below: |
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1 |
Mike works for Baltimore Corp. Fact's related to Mike's paycheck are listed below. He is paid $5,000 once per month on the last day of the month. He has already been paid for January. You are computing February payroll. |
2 |
Mike's pay is subject to social security taxes at a 6.2% rate and Medicare at a 1.45% rate. He has not exceeded the annual base for social security taxes. Assume the company will remit this tax and any employer match on the 3rd business day after pay day. |
3 |
Assume Mike's income tax withholding to be equal to 15% for Federal and 5% for Maryland. Assume that both of these withheld taxes will be remitted on the 3rd business day after pay day. |
4 |
Baltimore Corp. pays for workers' compensation insurance at a 3.5% rate. None of this cost is paid by the employee. |
5 |
Baltimore Corp provides its employees with health care insurance, and pays 80% of the $600 per employee monthly premium. The other 20% is paid by employees via payroll withholdings. The company has established a pre-tax plan for health insurance premiums. |
6 |
Mike participates in a tax-sheltered deferred savings plan (401k plan) and has 6% of his gross pay withheld each month. Baltimore Corp provides a 100% matching contribution of the first 5% of worker pay. There is no match after 5%. This is sent to the investment company on the 10th of the following month. |
7 |
Baltimore Corp's payroll is subject to federal (FUTA) tax of 6.2% of the first $7,000 of employee pay per year. The payroll is also subject to Maryland unemployment tax (SUTA) of 4.0% of the first $8,500 of employee pay per year. Both taxes are paid by the employer and the employee does not have these taxes withheld. |
8 |
Mike participates in the Charitable giving program to donate money to Baltimore Habitat for Humanity each month. $25 is withheld from his check and sent to the charity by Baltimore Corp on the 10th of the following month. |
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(a) |
Calculate Mikes net pay check in the space provided below. |
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(b) |
Prepare journal entries for Mike's pay and the related payroll expenses. |
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(c) |
What is the total cost to Baltimore Corp for Mike's services during February? |
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