As of June 30, 2016 (the computation date for the 2017 tax rate), Amanda Company had a negative balance of $1,015 in its unemployment reserve account in State A. The company’s average payroll over the last three 12-month periods amounted to $525,000. The unemployment compensation law of State A provides that the tax rate of an employer who has a negative balance on the computation date shall be 7.2% during the following calendar year.
Using the tax rate schedule presented in Problem 5-12B, compute:
a. The smallest voluntary contribution that Amanda Company should make in order to effect a change in its tax rate ................................................................ $.................
b. The amount of the tax savings as a result of the voluntary contribution if Amanda Company’s taxable payroll for 2017 is $650,000 ............................... $...............