Content/Instructions: Mattola Company is giving each of its employees a holiday

Question

Content/Instructions: Mattola Company is giving each of its employees a holiday bonus of $100 on Dec 20th (a nonpayday). The company wants each employee's check to be $100. The supplemental tax percent is used. a. What will be the gross amount of each bonus if each employee pays a state income tax of 2.8% (besides the other payroll taxes)?   Please demonstrate the process used to achieve your answer. Answer a: b. What would the net amount of each bonus check be if the company did not gross up the bonus? Please demonstrate the proces used to achieve your answer. Answer b: Content/Instructions: Mattola Company is giving each of its employees a holiday bonus of $100 on Dec 20th (a nonpayday). The company wants each employee's check to be $100. The supplemental tax percent is used. a. What will be the gross amount of each bonus if each employee pays a state income tax of 2.8% (besides the other payroll taxes)?   Please demonstrate the process used to achieve your answer. Answer a: b. What would the net amount of each bonus check be if the company did not gross up the bonus? Please demonstrate the proces used to achieve your answer. Answer b:

Explanation / Answer

Part A)

Since, the company wants the employee's paycheck to be $100, it means that after paying a tax of 2.8%, the employees should be left with $100. The amount of gross pay can be calculated with the use of following equation:

$100 = X - 2.8%*X where X is the Amount of Gross Pay

Solving the equation, we get,

X = 100/(1-2.8%) = $102.88 (answer)

The amount of gross bonus should be $102.88 so that after making adjustment for 2.8% of this gross amount, the employees are still able to receive $100 as bonus.

__________

Part B)

If the company didn't gross up the bonus, the net amount of each check would be calculated as follows:

Net Amount = Amount of Check - State Tax = 100 - 2.8%*100 (State Tax) = $97.20

Related Questions

Navigate

• Browse (All)
• Browse C
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.