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.
| Payroll problem. The facts and instructions are listed below: | |||||
| 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. | ||||
| (a) | Calculate Mikes net pay check in the space provided below. | ||||
| (b) | Prepare journal entries for Mike’s pay and the related payroll expenses. | ||||
| (c) | What is the total cost to Baltimore Corp for Mike’s services during February? | ||||
| (a) | |||||
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