Page 207 - Microsoft Word - 00 BA3 IW Prelims STUDENT.docx

Accounting for payroll

Illustration 1 (cont.)

In addition to George’s SS tax, assume that his employer is also liable to pay a
further 10.5 per cent SS contribution based upon George’s gross earnings.
The revised position is therefore:

$ $
George’s gross earnings 247.50
Less: Income tax 25% × ($247.50 – $75.00) 43.12
Less: SS (9% × $247.50) 22.27
———
(65.39)
———
George’s net earnings 182.11
Employer’s SS contribution: 10.5% × $247.50 25.98

George’s employer will deduct George’s income tax and SS and pay George
his net earnings. The employer will then pay George’s income tax and all of
the SS contributions over to the government.

Thus it can be seen that the total cost of employing George during for that
week amounted to $273.48 (the total of George’s gross earnings $247.50 plus
the employer’s SS contributions $25.98).

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