Question

Aspen Ski Resorts has 100 employees, each working 40 hours per week and earning $19 an hour. Although the company does not pay any health or retirement benefits, one of the perks of working at Aspen is that employees are allowed free skiing on their days off. Federal income taxes are withheld at 15% and state income taxes at 5%. FICA taxes are 7.65% of the first $118,500 earned per employee and 1.45% thereafter. Unemployment taxes are 6.2% of the first $7,000 earned per employee.

Required:
1. Compute the total salary expense, the total withholdings from employee salaries, and the actual direct deposit of payroll for the first week of January.
2. Compute the total payroll tax expense Aspen Ski Resorts will pay for the first week of January in addition to the total salary expense and employee withholdings calculated in Part 1.

Answer 1

1. Total salary expense $76,000

Total withholdings $21,014

Actual direct deposit $54,986

2. Total payroll tax expense $10,526

Step-by-step explanation:

1.Computation for the total salary expense, the total withholdings from employee salaries, and the actual direct deposit of payroll for the first week of January.

Computation for the total salary expense

Total salary expense= 100 employees x 40 Hours x $ 19 per Hour

Total salary expense=$76,000

Computation for the total withholdings from employee salaries

Federal income tax $11,400

($ 76,000 x 15% )

State income tax $3,800

($ 76,000 x 5% )

FICA taxes

($ 76,000 x 7.65% ) $5,814

Total withholdings $21,014

($11,400+$3,800+$5,814)

Computation for the actual direct deposit of payroll for the first week of January

Actual direct deposit= $ 76,000 -$21,014 ) Actual direct deposit=$54,986

Therefore Total salary expense will be $76,000,

Total withholdings will be $21,014 and Actual direct deposit will be $54,986

2. Computation for the total payroll tax expense Aspen Ski Resorts will pay for the first week of January

FICA taxes $5,814

($ 76,000 x 7.65% )

Unemployment taxes $4,712

($76,000 x 6.2% )

Total payroll tax expense $10,526

($5,814+$4,712)

Therefore the total payroll tax expense Aspen Ski Resorts will pay for the first week of January in addition to the total salary expense and employee withholdings calculated in Part 1 will be $10,526