Ali Campbell works as a cook for Jenny’s diner. Her regular pay rate is $15 per hour, with time-and-a-half for hours in excess of 40 per week. Campbell’s payroll deductions include withheld income tax of 10% of total earnings, FICA tax, and a weekly deduction of $15 for a charitable contribution to United Way. Campbell’s employer is required to pay SUTA and FUTA tax. Use a 5.4% SUTA tax rate, and a .6% FUTA tax rate. The state unemployment wage base in the state where Campbell works is $36,000. Assume that Campbell has made $4,100 prior to this pay period.
Requirements
1. Assuming Campbell worked 49 hours during the week, compute her gross pay and net pay for the week. Round amounts to the nearest cent.
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2. Make journal entries to record wages expense and payroll tax expense for the week. Explanations are not required. Round amounts to the nearest cent?
SOLUTION Requirement 1
Gross Pay: Gross Pay: Gross Pay: 40 hours x $15.00 = 40 hours x $15.00 = 40 hours x $15.00 = 40 hours x $15.00 = 40 hours x $15.00 = $600.00 $600.00 $600.00 9 hours x $15.00 x 1.5 = 9 hours x $15.00 x 1.5 = 9 hours x $15.00 x 1.5 = 9 hours x $15.00 x 1.5 = 9 hours x $15.00 x 1.5 = 202.50 202.50 Gross Pay Gross Pay Gross Pay $802.50 $802.50 Deductions: Deductions: Deductions: FICA Tax FICA Tax FICA Tax $802.50 x 0.0765 = $802.50 x 0.0765 = $802.50 x 0.0765 = $802.50 x 0.0765 = $802.50 x 0.0765 = $802.50 x 0.0765 = $61.39 $61.39 $61.39 $61.39 Withholding income tax Withholding income tax Withholding income tax Withholding income tax $802.50 x 0.10 = $802.50 x 0.10 = $802.50 x 0.10 = $802.50 x 0.10 = $802.50 x 0.10 = $802.50 x 0.10 = 80.25 80.25 80.25 80.25 Charitable contribution Charitable contribution Charitable contribution Charitable contribution 15.00 15.00 15.00 15.00 Total deductions Total deductions Total deductions Total deductions $156.64 $156.64 $156.64 $156.64 Net Pay: Net Pay: Net Pay: Gross Pay Gross Pay Gross Pay $802.50 $802.50 Less: Total deductions Less: Total deductions Less: Total deductions Less: Total deductions Less: Total deductions (156.64) (156.64) (156.64) Net Pay Net Pay Net Pay $645.86 $645.86 $645.86 Requirement 2 Requirement 2 Requirement 2 Requirement 2 Date Accounts and Explanation Accounts and Explanation Accounts and Explanation Accounts and Explanation Accounts and Explanation Accounts and Explanation Accounts and Explanation Debit Debit Debit Credit Credit Credit Wages Expense Wages Expense Wages Expense Wages Expense 802.50 802.50 FICA Tax Payable FICA Tax Payable FICA Tax Payable FICA Tax Payable FICA Tax Payable FICA Tax Payable FICA Tax Payable 61.39 61.39 61.39 Employee Income Tax Payable Employee Income Tax Payable Employee Income Tax Payable Employee Income Tax Payable Employee Income Tax Payable Employee Income Tax Payable Employee Income Tax Payable 80.25 80.25 80.25 United Way Payable United Way Payable United Way Payable United Way Payable United Way Payable United Way Payable United Way Payable 15.00 15.00 15.00 Wages Payable or Cash Wages Payable or Cash Wages Payable or Cash Wages Payable or Cash Wages Payable or Cash Wages Payable or Cash Wages Payable or Cash 645.86 645.86 645.86 To record wages expense. To record wages expense. To record wages expense. To record wages expense. To record wages expense. To record wages expense. To record wages expense. To record wages expense. Date Date Accounts and Explanation Accounts and Explanation Accounts and Explanation Accounts and Explanation Accounts and Explanation Accounts and Explanation Accounts and Explanation Accounts and Explanation Debit Debit Credit Credit Payroll Tax Expense Payroll Tax Expense Payroll Tax Expense Payroll Tax Expense 109.55 FICA Tax Payable FICA Tax Payable FICA Tax Payable FICA Tax Payable FICA Tax Payable FICA Tax Payable FICA Tax Payable FICA Tax Payable 61.39 61.39 SUTA Tax Payable SUTA Tax Payable SUTA Tax Payable SUTA Tax Payable SUTA Tax Payable SUTA Tax Payable SUTA Tax Payable SUTA Tax Payable 43.34 43.34 FUTA Tax Payable FUTA Tax Payable FUTA Tax Payable FUTA Tax Payable FUTA Tax Payable FUTA Tax Payable FUTA Tax Payable FUTA Tax Payable 4.82 4.82 To record payroll tax expense. To record payroll tax expense. To record payroll tax expense. To record payroll tax expense. To record payroll tax expense. To record payroll tax expense. To record payroll tax expense. To record payroll tax expense. To record payroll tax expense. Payroll Tax Expense: Payroll Tax Expense: Payroll Tax Expense: Payroll Tax Expense: FICA Tax FICA Tax FICA Tax $802.50 x 0.0765 = $802.50 x 0.0765 = $802.50 x 0.0765 = $802.50 x 0.0765 = $802.50 x 0.0765 = $802.50 x 0.0765 = $61.39 $61.39 $61.39 SUTA Tax SUTA Tax SUTA Tax $802.50 x 0.054 = $802.50 x 0.054 = $802.50 x 0.054 = $802.50 x 0.054 = $802.50 x 0.054 = $802.50 x 0.054 = 43.34 43.34 43.34 FUTA Tax FUTA Tax FUTA Tax $802.50 x 0.006 = $802.50 x 0.006 = $802.50 x 0.006 = $802.50 x 0.006 = $802.50 x 0.006 = $802.50 x 0.006 = 4.82 4.82 Total payroll tax expense Total payroll tax expense Total payroll tax expense Total payroll tax expense $109.55 $109.55 $109.55 $109.55