Question

Action Travel has 10 employees each working 40 hours per week and earning $20 an hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the actual direct deposit of payroll for the first week of January?
a.$5,404.
b.$5,708.
c.$4,792.
d.$8,000.

Answer 1

Answer:

b.$5,708.

Explanation:

The computation of the actual direct deposit of payroll is shown below:

= Total salary expense - Total salary expense × Federal income tax rate -  Total salary expense × state income tax rate -  Total salary expense × FICA tax rate

= $8,000 - $8,000 × 15% - $8,000 × 6% - $8,000 × 7.65%

= $8,000 - $1,200 - $480 - $612

= $5,708

The total salary expense is computed below:

= 10 employees × 40 hours × $20

= $8,000