A contractor has three employees with annual wages of $45,000, $32,000, and $15,000 respectively. What is the total FUTA tax liability?
Correct Answer
B) $126
FUTA is calculated on the first $7,000 of wages per employee at 0.6%. Total FUTA = 3 employees × $7,000 × 0.6% = $126.
Why This Is the Correct Answer
FUTA (Federal Unemployment Tax Act) tax is calculated at 0.6% on only the first $7,000 of wages per employee per year. Since all three employees earn more than $7,000 annually, the calculation uses the $7,000 wage base for each employee. The total FUTA liability is 3 employees × $7,000 × 0.6% = $126.
Why the Other Options Are Wrong
Option A: $378
This answer incorrectly applies the FUTA rate to a higher wage base, likely using $42,000 (3 × $14,000) instead of the correct $21,000 (3 × $7,000) wage base.
Option C: $252
This answer appears to use an incorrect FUTA rate or wage base calculation, possibly applying 0.6% to the total of all wages ($92,000) rather than the limited wage base of $7,000 per employee.
Memory Technique
Remember 'FUTA 7-6': FUTA applies to first $7,000 per employee at 0.6% rate
Reference Hint
Look up 'Payroll Taxes' or 'FUTA Tax' in the Business and Finance chapter of your contractor reference manual
More Business & Finance Questions
A general contractor purchases equipment worth $45,000 with a useful life of 9 years and no salvage value. Using straight-line depreciation, what is the annual depreciation expense?
What is the typical recommended coverage amount for general liability insurance for a small to medium-sized general contracting business?
A contractor estimates startup costs of $75,000 for equipment, $25,000 for initial inventory, $15,000 for insurance premiums, and $10,000 for working capital. They can finance 70% of the total. How much cash do they need?
When establishing professional relationships with architects and engineers, what is the most important factor for a general contractor to consider?
A partnership agreement for a construction company should address all of the following EXCEPT:
A contractor purchases a truck for $60,000. After 5 years, it has accumulated depreciation of $35,000. What is the truck's book value?
A contractor's business plan projects first-year revenue of $500,000 with a 15% net profit margin. If actual revenue is $450,000 with the same profit margin, what is the variance in net profit?
Using the Modified Accelerated Cost Recovery System (MACRS), construction equipment is typically depreciated over how many years?
A contractor is comparing financing options for equipment purchase. Option A: $80,000 cash purchase. Option B: $20,000 down, $65,000 financed at 6% for 4 years. What is the total cost of Option B?
A contractor purchases equipment using a capital lease with a present value of $120,000. How should this be recorded on the balance sheet?
People Also Study
Related Study Resources
Previous Question
A contractor fails to obtain a building permit before starting a $75,000 addition project. Under Florida Statute 455.228, what action can the licensing board take?
Next Question
A general contractor is calculating their annual overhead costs. If their total annual payroll is $850,000 and the current FICA rate is 7.65%, what is the employer's FICA contribution?