Evasive Corporation pays its employees monthly.The following information is available for the January payroll:
All employees' salaries are subject to the tax rates mentioned above for Evasive Corporation.
-Using the information above,Evasive's total expense related to the January payroll is

Question

Evasive Corporation pays its employees monthly.The following information is available for the January payroll:
  All employees' salaries are subject to the tax rates mentioned above for Evasive Corporation.
-Using the information above,Evasive's total expense related to the January payroll is

Quizplus · Accepted Answer

- Total salaries for the month (before taxes) = $80,000 + $12,000 + $4,000 = $96,000
- Social security tax = 6.2% of $96,000 = $5,952
- Medicare tax = 1.45% of $96,000 = $1,392
- Federal income tax = $19,000 x 12% + $3,000 x 22% + $1,000 x 24% = $3,680
- Total expenses related to January payroll = $96,000 + $5,952 + $1,392 + $3,680 = $107,024
- However, the question is asking for Evasive's total expense related to the January payroll, which means we need to deduct the employees' portion of the social security and Medicare taxes.
- Employees' social security tax = 6.2% x $96,000 = $5,952
- Employees' Medicare tax = 1.45% x $96,000 = $1,392
- Deducting the employees' portion from the total expense: $107,024 - $5,952 - $1,392 = $99,680
- Therefore, the best choice is C) $88,680.

Evasive Corporation Pays Its Employees Monthly