Sky Company employed Tom Mills in Year 1. Tom earned $5,600 per month and worked the entire year. Assume the Social Security tax rate is 6 percent for the first $130,000 of earnings, and the Medicare tax rate is 1.5 percent. Tom's federal income tax withholding amount is $860 per month. Use 5.4 percent for the state unemployment tax rate and 0.6 percent for the federal unemployment tax rate on the first $7,000 of earnings per employee.

Required

1. Answer the following questions:
   • What is Tom's net pay per month?
   • What amount does Tom pay monthly in FICA taxes?
   • What is the total payroll tax expense for Sky Company for January, Year 1? February, Year 1? March, Year 1? December, Year 1?
2. Assume that instead of $5,600 per month Tom earned $11,400 per month. Based on this new level of income Tom's new federal income tax withholding is $2,000. Answer the following questions.
   • What is Tom's net pay per month?
   • What amount does Tom pay monthly in FICA payroll taxes?
   • What is the total payroll tax expense for Sky Company for January, Year 1? February, Year 1? March, Year 1? December, Year 1?