The total payroll of Trolley Company for the month of October, 2014 was $800,000

Question

The total payroll of Trolley Company for the month of October, 2014 was $800,000, of which $150,000 represented amounts paid in excess of $106,800 to certain employees. $500,000 represented amounts paid to employees in excess of the $7,000 maximum subject to unemployment taxes. $150,000 of federal income taxes and $15,000 of union dues were withheld. The state unemployment tax is 1%, the federal unemployment tax is .8%, and the current F.I.C.A. tax is 7.65% on an employee’s wages to $106,800 and 1.45% in excess of $106,800. What amount should Trolley record as payroll tax expense?

a.   $72,800.

b.   $66,300.

c.   $57,300.

d.   $61,200.

Explanation / Answer

Payroll tax expense = FICA Tax Payable by Employer + state unemployment tax + federal unemployment tax

Payroll tax expense = (1.45%*150000 + 7.65%*(800000-150000)) + 1%*(800000-500000) + 0.8%*(800000-500000)

Payroll tax expense = 51900 + 3000 + 2400

Payroll tax expense = $ 57300

Answer

c.   $57,300.

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