Q 2 GROSS PAY EXERCISES If Hours 40, Gross Pay = (40 * Rate) + (OT Hours * 1.5 * Rate) TOTAL SCORE 0 To compute Gross Pay, multiply the hours worked times the employee's pay rate. We consider a full-time employee to be one who is working 40 hours per week-- that would be 5 days times 8 hours per day. 3 4 5 6 7 /9 8 However, if the employee is working MORE THAN 40 hours in a week, the hours greater than 40 are compensated at the rate of 1.5 times the regular rate. 9 10 Choose Employee (1-10) 1 11 12 13 1. Sally Thomas earns $22.00 per hour. This week, this employee worked 40 hours. Compute the gross pay. 14 15 880 Gross Pay = 0 0 16 17 18 2. EMPLOYEE DEDUCTIONS 19 20 21 a. The employee must contribute to a. Social Security, b. Medicare and c. Federal Income Taxes a. Social Security Tax = 6% of wages earned. When the employee hits $100,000 for the year, the employer stops taking out Social Security Compute Social Security Tax Owed by Sally Thomas 0 22 23 24 b. b. Medicare Tax = 1.5% of all wages earned by the employee. Compute Medicare Tax Owed by Sally Thomas 0 25 26 27 C. Compute the Federal Income Tax Owed by the employee. 59 X A B C. K D E F G H u Compute the Federal Income Tax Owed by the employee. This can be a confusing calculation. We start by determining the number of withholding allowances for the employee. The employee can claim one allowance for himself or herself. Additionally, if the employee is married or has children, each family member is worth one withholding allowance. The implication is that the more withholding allowances you claim, the LOWER your income tax amount. Let us assume that the employee above is SINGLE, and therefore has 1 withholding allowance. Since each allowance reduces the employee's wages by $75, we compute the wages subject to withholding by subtracting $75 from the employee's total wages. 7 3 3 We then consult the Wage Bracket Withholding Table shown below. For a SINGLE Person If the wage amount (after subtracting withholding allowances is The amount of income tax to withhold is Not Over $42 $0 Over But Not Over of Excess Over $42 $214 $0 + 10% $42 $214 $739 $17.20 + 15% $214 $739 $1,732 $95.95 25% $739 $1,732 $3,566 $344.20 28% $1,732 $3,566 $7,703 $857.72 33% $3,566 $7,703 $7,735 $2,222,93 + 35% $7,703 $7,735 2234.13 + 39.60% $7,735 1 2 3 4. 5 6 7 8 + + + -9 0 Compute the Income Tax Owed by Sally Thomas Hint: the amount subject to withholding is her gross pay minus $75. -O 51 52 63 54 3. Make the Journal Entry Fill in the amount for each item from your answers above. 55 Wages Expense Corial Ceruritu Dovable EMPLOYEE DEDUCTIONS O Enter Gross Pay nontor Camal cosurit litam A 32 K D E F H Let us assume that the employee above is SINGLE,and therefore has 1 withholding allowance. Since each allowance reduces the employee's wages by $75, we compute the wages subject to withholding by subtracting $75 from the employee's total wages. M N 33 o 34 35 36 37 38 39 40 41 42 We then consult the Wage Bracket Withholding Table shown below. For a SINGLE Person If the wage amount (after subtracting withholding allowances is The amount of income tax to withhold is Not Over $42 $0 Over But Not Over of Excess Over $42 $214 $0 10% $42 $214 $739 $17.20 15% $214 $739 $1,732 $95.95 25% $739 $1,732 $3,566 $344.20 28% $1,732 $3,566 $7,703 $857.72 33% $3,566 $7,703 $7,735 $2,222,93 + 35% $7,703 $7,735 2234.13 39.60% $7,735 43 44 + + 45 46 47 48 + 49 50 0 Compute the Income Tax Owed Sally Thomas Hint: the amount subject to withholding is her gross pay minus $75. 51 52 53 3. Make the Journal Entry Fill in the amount for each item from your answers above. 54 O Enter Gross Pay 55 56 57 Wages Expense Social Security Payable Medicare Payable Federal Income Tax Withholding Payable Wages Payable O Enter Social Security (item 2a) Enter Medicare amount (item 2b) O Enter Withholding (item 2c) O Compute Wages Payable by subtracting the 3 liabilities from Wages Expense 58 59