A Florida construction company's SUTA rate is 2.7% on the first $7,000 of wages per employee. With 8 employees each earning over $20,000 annually, what is the total SUTA tax liability?
Correct Answer
C) $1,512.00
SUTA tax applies to the first $7,000 per employee. 8 employees × $7,000 × 2.7% = $1,512.00. The fact that employees earn over $20,000 doesn't matter since SUTA only applies to the first $7,000.
Why This Is the Correct Answer
Option A is correct because SUTA (State Unemployment Tax Act) tax in Florida applies only to the first $7,000 of wages per employee annually, regardless of total earnings. With 8 employees and a 2.7% rate: 8 employees × $7,000 taxable wages × 2.7% = $1,512.00. The wage cap is crucial - even though employees earn over $20,000, only the first $7,000 per employee is subject to SUTA tax.
Why the Other Options Are Wrong
Option A: $756.00
Option C applies the 2.7% rate to the full $20,000 annual salary rather than the $7,000 SUTA wage cap. This calculation (8 × $20,000 × 2.7% = $4,320) ignores the fundamental principle that SUTA tax only applies to the first $7,000 of each employee's wages.
Option D: $1,890.00
Option D calculates the tax for only 4 employees instead of 8, resulting in half the correct amount (4 × $7,000 × 2.7% = $756). This error stems from misreading the number of employees in the company or making an arithmetic error in the multiplication.
Memory Technique
Remember 'SUTA SEVEN': SUTA tax Stops at SEVEN thousand dollars per employee, no matter how much more they earn.
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?