Question 2:

The total payroll of Waters Company for the month of October, 2004 was $480,000, of which $120,000 represented amounts paid in excess of $84,900 to certain employees. $400,000 represented amounts paid to employees in excess of the $7,000 maximum subject to unemployment taxes. $120,000 of federal income taxes and $12,000 of union dues were withheld. The state unemployment tax is 1%, the federal unemployment tax is .8%, and the current F.I.C.A. tax is 7.65% on an employees wages to $84,900 and 1.45% in excess of $84,900. What amount should Waters record as payroll tax expense?

a. $158,160.

b. $150,720.

c. $30,720.

d. $37,920.

Show your work and how you got the answer. Thanks.