7
Calculating Pay and
1. The Fair Labor Standards Act regulates the minimum hourly wage as well as the
2. Overtime pay is the number of overtime hours times 1.5 times the regular hourly
rate.
3. Information on the W–4 form is used to determine the amount of FIT withheld from
5. Circular E has FIT tables available based on salary range, marital status, frequency
of payment, and amount of allowances claimed. States have similar tables for SIT.
6. Businesses should prepare payroll registers prior to paying employees in order to
8. FICA is a tax used to fund, for example, (1) monthly retirement benefits of those over
9. OASDI is 6.2% on earnings up to $117,000; Medicare (1.45%) has no wage base
limit. Check with the IRS for latest rates.
11. The employee individual earnings record contains information about the total amount
of wages paid, deductions for the calendar year, etc., that aids the employer in
12.
13. Agree
FICA—OASDI
($117,000 × .062)
= $7,254.00
FICA—Medicare
($130,000 × .0145)
= 1,885.00
$9,139.00
PARTNER:
FICA—OASDI
($75,000 × .062)
= $4,650.00
FICA—Medicare
($75,000 × .0145)
= 1,087.50
$5,737.50
14. A credit for the state unemployment program is applied against FUTA rate. The
maximum amount of the credit is 5.4%.
15.
A state will assign each business a particular percentage for state unemployment taxes
based on the employment record of the business. The rate will vary depending on the
amount paid to former employees of the business due to layoffs, etc.
16.
The employer pays workers’ compensation insurance. It provides benefits for
accidental injury or death while on the job. Premiums are calculated in advance based
on estimated payroll, type of work performed and extent of on-the-job claims.
17.
No, the Fair Labor Standards Act addresses which employees should be considered
hourly for payroll purposes and which should be salaried.
Recording
Payroll
Recording
Payroll
18. FICA OASDI, FICA Medicare, FUTA, and SUTA are recorded when recording
Payroll Tax Expense.
19. A calendar year is January 1 to December 31.
20. Agree. Employers must use a calendar year for payroll purposes, even if the
employer uses a noncalendar fiscal year for financial statements.
Copyright © 2016 Pearson Education, Inc.
7-4
SOLUTIONS TO CHAPTER 7 CONCEPT CHECKS
1.
2.
FIT
$279.00
FICA-OASDI
$49.60
FICA-Medicare $28.71
3.
$1,980.00
(279.00)
FIT
(28.71)
FICA Medicare
(49.60)
FICA OASDI
(99.00)
State income tax
(35.00)
Health insurance
$1,488.69 Net Pay
4.
A.
1
B.
2
C.
2
D.
2
E.
2
F.
3
5.
A.
EE, ER
B.
EE
C.
ER
D.
ER
6.
Accounts Affected
Category
Rules
Payroll Tax Expense
Expense
Increase with Dr.
FICA OASDI Payable
Liability
Increase with Cr.
SIT Payable
Liability
Increase with Cr.
SUTA Payable
Liability
Increase with Cr.
Prepaid Workers’
Compensation Insurance
Asset
Increase with Dr.
SOLUTIONS TO SET A EXERCISES
FICA – OASDI
FICA – Medicare
FUTA
SUTA
Total
7A-1.
Part a.
Employee
Regular
Wages
Overtime
Wages
Total Wages
Paula Anderson
$370
$ 0
$ 370
Olivia Turner
$520
$19.50
$539.50
Kellan Gates
$720
$135.00
$855.00
EXERCISES (CONTINUED)
7A–5.
Payroll Taxes
Earning $330/week
Payroll Taxes
Earning $2,100/week
FICA – OASDI
$ 115.01
$ 224.75
FICA – Medicare
26.90
52.56
FUTA
7.95
7.95
SUTA
76.85
76.85
Total
$ 226.71
$ 362.11
7A–6.
FICA — OASDI
$ 8,680
FICA – Medicare
2,407
FUTA
666
SUTA
6,327
Total
$18,080
Date
Account Titles and Description
PR
Dr.
Cr.
Payroll Tax Expense
18
0
8
0
00
FICA—OASDI Payable
8
6
8
0
00
FICA—Medicare Payable
2
4
0
7
00
SUTA Payable
6
3
2
7
00
FUTA Payable
6
6
6
00
7A–7.
W. Duncan
$ 42.00
S. Ivan
42.00
V. North
42.00
H. Young
33.54
Total
$ 159.54
7A–8.
Office
$ 70.40
Repairs
$ 1,370.60
SOLUTIONS TO SET B EXERCISES
FICA – OASDI
FICA – Medicare
FUTA
SUTA
Total
7B-1
Part
a.
Employee
Regular
Wages
Overtime
Wages
Total Wages
Marie Norris
$ 385
$ 0
$ 385
Heidi Rodes
$ 520
$ 195
$ 715
Norman Duncan
$ 640
$ 168
$ 808
EXERCISES (CONTINUED)
7B-5
Payroll Taxes
Earning $290/week
Payroll Taxes
Earning $3,100/week
FICA – OASDI
$ 106.33
$ 280.55
FICA – Medicare
24.87
65.61
FUTA
8.55
8.55
SUTA
84.08
84.08
Total
$ 223.83
$ 438.79
7B–6.
FICA – OASDI
$ 7,812
FICA – Medicare
2,291
FUTA
588
SUTA
5,880
Total
$ 16,571
Date
Account Titles and Description
PR
Dr.
Cr.
Payroll Tax Expense
16
5
7
1
00
FICA—OASDI Payable
7
8
1
2
00
FICA—Medicare Payable
2
2
9
1
00
SUTA Payable
5
8
8
0
00
FUTA Payable
5
8
8
00
7B–7.
O. Barn
$ 42.00
Z. Grande
42.00
J. Mathison
42.00
E. Walsh
35.88
Total
$ 161.88
7B–8.
Office
$ 66.70
Repairs
$ 1,263.60
SOLUTIONS TO SET A PROBLEMS
PROBLEM 7A-1
Hourly
# of Hours
Gross
Employee
Rate
Worked
Earnings
A.
Jade Martina
$ 9
50
$ 495.00
B.
Lauren McBride
15
39
585.00
C.
Natala Polino
16
40
640.00
D.
Dmitri Wittman
20
46
980.00
7-10
PROBLEM 7A-2
PAYROLL REGISTER
Distribution of Expense
Accounts
00
00
00
00
C. Serv.
0
0
0
0
0
8
1
9
6
0
8
4
1
2
4
Taxable Earnings
OASDI
00
00
00
00
00
00
Office
00
00
00
0
0
0
0
0
0
0
0
0
0
5
5
8
1
9
5
5
0
6
2
0
5
8
2
2
0
3
1
1
1
1
6
1
1
2
FUTA/SUTA
00
00
00
00
00
00
Net
Pay
60
87
17
48
73
85
0
0
0
0
0
0
3
7
9
6
1
8
8
5
0
3
7
5
1
9
8
6
6
2
1
1
5
Current
Earnings
(YTD)
00
00
00
00
00
00
Health
Insurance
00
00
00
00
00
00
0
0
0
0
0
0
5
5
5
5
5
5
0
5
5
0
1
1
2
2
2
2
2
2
6
2
5
5
8
7
1
43
34
57
117
28
281
Current Earnings
Gross
00
00
00
00
00
00
SIT
00
50
50
40
30
70
0
0
0
0
0
0
8
7
1
2
4
3
0
5
5
8
1
9
4
3
3
6
2
0
6
2
0
0
8
7
2
1
1
1
2
6
Overtime
FIT
00
00
00
00
00
00
1
4
4
8
7
4
2
3
0
2
2
1
2
1
1
2
7
Regular
00
00
00
00
00
00
FICA
Medicare
20
13
23
16
75
47
0
0
0
0
0
0
3
8
5
0
1
8
0
5
5
8
1
9
2
1
1
3
1
9
6
2
0
0
8
7
1
1
1
2
6
Prior
Earnings
(YTD)
00
00
00
00
00
00
OASDI
20
50
10
96
22
98
0
0
0
0
0
0
9
7
5
7
0
9
0
0
0
2
0
2
9
7
6
9
5
8
0
0
5
4
0
9
3
42
33
56
115
28
274
Allowance
and Marital
Status
0
1
1
3
3
–
–
–
–
–
S
S
S
S
S
Employee
Name
Bristow, H.
Fein, K.
Kent, H.
Barr, B.
Alden, L.
Bristow, H.
Fein, K.
Kent, H.
Barr, B.
Alden, L.