Action Travel has 10 employees each working 40 hours per week and earning $20 an hour. Federal income taxes are withheld at 15% and state income taxes at 6%. FICA taxes are 7.65% and unemployment taxes are 3.8% of the first $7,000 earned per employee. What is the actual direct deposit of payroll for the first week of January?

a.$5,404.

b.$5,708.

c.$4,792.

d.$8,000.

b.$5,708.

Explanation:

The computation of the actual direct deposit of payroll is shown below:

= Total salary expense - Total salary expense * Federal income tax rate - Total salary expense * state income tax rate - Total salary expense * FICA tax rate

= $8,000 - $8,000 * 15% - $8,000 * 6% - $8,000 * 7.65%

= $8,000 - $1,200 - $480 - $612

= $5,708

The total salary expense is computed below:

= 10 employees * 40 hours * $20

= $8,000