A company\'s had fixed interest expense of $5,000, its income before interest ex

Question

A company's had fixed interest expense of $5,000, its income before interest expense and income taxes is $17,000, and its net income is $9,400. The company's times interest earned ratio equals:

0.5.

1.8.

1.9.

3.4.

0.3.

An employee earns $5,500 per month working for an employer. The FICA tax rate for Social Security is 6.2% and the FICA tax rate for Medicare is 1.45%. The current FUTA tax rate is 0.6%, and the SUTA tax rate is 4.4%. Both unemployment taxes are applied to the first $7,000 of an employee's pay. The employee has $182 in federal income taxes withheld. The employee has voluntary deductions for health insurance of $150 and contributes $75 to a retirement plan each month. What is the amount the employer should record as payroll taxes expense for the employee for the month of January?

$420.75

$464.75

$602.75

$841.50

$695.75

Explanation / Answer

a. A company's had fixed interest expense of $5,000, its income before interest expense and income taxes is $17,000, and its net income is $9,400. The company's times interest earned ratio equals:
Times interest earned ratio = EBIT/Interest = $17,000/$5,000 = 3.4

b.
Social Security = $5500 x 6.2% = 341
Medicare = 5500 x 1.45% = $79.75
FUTA = 5500 x 0.6% = 33
SUTA = 5500 x 4.4% = $242
Total payroll expense = $695.75

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