lecture9_solutions - E93. Req. 1 The additional labor...

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E9–3. Req. 1 The additional labor expense was $6,000, which is the total of payroll taxes that must be paid by the employer. The $10,000 income taxes and the $6,000 FICA taxes paid by the employees did not add to the labor cost of the employer. The total labor cost to the company was $86,000 + $6,000 = $92,000. The employees’ take-home pay was $70,000; that is, the total of salaries and wages less the deductions paid by the employees (i.e., $86,000 – $10,000 – $6,000). Req. 2 Balance sheet liabilities: Liability for income taxes withheld . ......................................................... $ 10,000 FICA taxes payable ($6,000 + $6,000) . .................................................. 12,000 Total . .................................................................................................. $22,000 Req. 3 Both managers and analysts would understand that a 10% increase in salaries is more expensive than a 10% increase in the employer’s share of FICA (or any other benefit). The reason is that many benefits are stated as a percentage of salary. As a result, the cost of a 10% increase in salaries is an increase in both salaries and fringe benefits. E9–9.
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This note was uploaded on 05/10/2011 for the course ACCT 1002 taught by Professor Ng during the Spring '11 term at National University of Singapore.

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lecture9_solutions - E93. Req. 1 The additional labor...

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