An employee's gross pay is $3,200 for the month. Calculate the employee's portion of FICA taxes.
Correct Answer
B) $244.80
Employee FICA = $3,200 × 7.65% (6.2% Social Security + 1.45% Medicare) = $244.80.
Why This Is the Correct Answer
The correct answer is A because FICA taxes consist of both Social Security (6.2%) and Medicare (1.45%) taxes that employees pay on their gross wages. The total employee FICA rate is 7.65% (6.2% + 1.45%). When applied to the gross pay of $3,200, this equals $244.80 ($3,200 × 0.0765 = $244.80).
Why the Other Options Are Wrong
Option A: $198.40
This amount ($46.40) represents only the Medicare portion of FICA taxes ($3,200 × 1.45% = $46.40), but fails to include the Social Security tax portion of 6.2%.
Option C: $46.40
This amount ($289.60) is incorrect and appears to use an inflated FICA rate of approximately 9.05%, which exceeds the actual combined employee FICA rate of 7.65%.
Memory Technique
Remember 'FICA 765' - FICA rate is 7.65%, which breaks down to 6.2% Social Security + 1.45% Medicare. The numbers 765 = 7.65% total rate.
Reference Hint
Look up payroll taxes and FICA rates in the Business and Finance chapter, specifically the section on employee tax withholdings and payroll calculations.
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
In Florida, what is the primary difference between an LLC and a corporation regarding personal liability protection?
Next Question
A general contractor employs 30 workers and pays overtime to 8 employees averaging 6 hours per week each at time-and-a-half. If the average regular hourly rate is $28, what is the weekly overtime cost?