7
Calculating Pay and
Recording Payroll
Taxes: The Beginning of
the Payroll Process
ANSWERS TO DISCUSSION QUESTIONS AND
CRITICAL THINKING/ETHICAL CASE
1. The Fair Labor Standards Act regulates the minimum hourly wage as well as the
rate.
3. Information on the W-4 form is used to determine the amount of FIT withheld from
4. Agree. Less taxes are withheld with each additional allowance, so therefore, more
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
11. The employee individual earnings record contains information about the total
amount of wages paid, deductions for the calendar year, etc., that aids the
12.
13. Agree
YOU:
FICA—OASDI
($127,200 × .062)
= $7,886.40
FICA—Medicare
FICA—Medicare
15. A state will assign each business a particular percentage for state unemployment
16. The employer pays workers’ compensation insurance. It provides benefits for
Recording
Recording
SOLUTIONS TO CHAPTER 7 CONCEPT CHECKS
1.
2.
FIT
$258.00
FICA-OASDI
$74.40 ($1,200 x 6.2%)
Total Deductions $360.39
3.
$1,930.00
FICA Medicare
FICA OASDI ($1,200 x 6.2%)
State income tax ($1,930 X 5%)
Health insurance
4. A. 1
5. A. EE,ER
6.
Accounts Affected
Category
Rules
Payroll Tax Expense
Expense
Increase with Dr.
SUTA Payable
Liability
Increase with Cr.
SOLUTIONS TO SET A EXERCISES
Freda Walker
Louis Jones
7A-3.
FICA-OASDI
$109.12
7A-4.
Payroll Taxes
5.4% Merit Rating
Payroll Taxes
4.6% Merit Rating
FICA – OASDI
$ 109.12
$ 109.12
FICA – Medicare
FUTA
SUTA
Total
7A–5.
Payroll Taxes
Earning $260/week
Payroll Taxes
Earning $2,100/week
FICA – OASDI
$ 109.12
$ 223.20
FICA – Medicare
FUTA
SUTA
Total
7A-1.
Part a.
Employee
Regular
Wages
Overtime
Wages
Total
Wages
7A-2.
Han Gan
James Pilcher
Gross earnings for the current pay period
$ 1,710.00
$ 1,580.00
Deductions for employee withholding taxes:
7A-6.
FICA — OASDI
$ 7,688
FICA – Medicare
FUTA
SUTA
Date
Account Titles and Description
PR
Dr.
Cr.
Payroll Tax Expense
15
9
2
8
00
FICA—OASDI Payable
7
6
8
8
00
2
2
6
2
00
5
8
8
00
5
3
9
0
00
7A–7.
Y. Connor
$ 42.00
C. Hart
J. Mathison
Y. Ralph
Total
7A–8.
Office
Repairs
Total
SOLUTIONS TO SET B EXERCISES
7B-1
Part a.
Samantha York
Tim Larson
7B–2.
7B–3.
FICA-OASDI
$121.83
FUTA
SUTA
Total
$244.37
7B–4.
Payroll Taxes
5.1% Merit Rating
Payroll Taxes
4.6% Merit Rating
FICA – OASDI
$121.83
$121.83
FICA – Medicare
FUTA
SUTA
7B-5
Payroll Taxes
Earning $290/week
Payroll Taxes
Earning $2,100/week
FICA – OASDI
$121.83
$234.05
FICA – Medicare
FUTA
SUTA
Total
$244.37
$382.84
Employee
Regular
Wages
Overtime
Wages
Total Wages
Penny Cooper
$ 648
$ 0
$ 648
Li Kan
David Parker
Gross earnings for the current pay period
$ 1,720.00
$ 1,570.00
Deductions for employee withholding taxes:
Federal income tax
Net pay
$1,380.42
7B–6.
FICA – OASDI
$ 8,494
FICA – Medicare
FUTA
SUTA
Total
Date
Account Titles and Description
PR
Dr.
Cr.
7B–7.
P. Franklin
$ 42.00
O. Hienze
O. Roberts
R. Waters
Total
7B–8.
Office
29,000/100 x $0.23
$66.70
Repairs
78,000/100 x $1.62
Total
SOLUTIONS TO SET A PROBLEMS
PROBLEM 7A-1
Hourly
# of Hours
Gross
Employee
Rate
Worked
Earnings
7-9
PROBLEM 7A-2
PAYROLL REGISTER
Taxable Earnings
OASDI
FUTA/SUTA
37
90
8
2
3
7
9
0
1
Current
Earnings
(YTD)
00
00
5
5
3
3
Current Earnings
Gross
00
00
5
8
2
2
Overtime
00
00
6
7
5
5
1
1
Regular
13
30
8
0
1
2
Prior
Earnings
(YTD)
50
80
7
6
7
8
Allowance
and Marital
Status
Employee
Name
Dunn, H.
Herman, K.
0
0
0
1
0
7-10
PROBLEM 7A-3
PAYROLL REGISTER
OCTOBER 13, 201X
00
0
00
8
7
5
Taxable Earnings
OASDI
FUTA/SUTA
78
2
7
4
Current
Earnings
(YTD)
00
7
2
Current Earnings
Gross
Overtime
00
4
3
Regular
38
8
Prior
Earnings
(YTD)
84
5
3
Allowance
and Marital
Status
Employee
Name
Fine, P.
7-11
PROBLEM 7A-4
PAYROLL REGISTER
DECEMBER 5, 201X
00
0
00
0
6
5
Taxable Earnings
1
0
3
FUTA/SUTA
26
5
5
1
1
Current
Earnings
(YTD)
00
1
1
Current Earnings
Gross
40
0
4
1
Overtime
00
4
3
1
Salary
62
2
2
Prior
Earnings
(YTD)
72
6
9
Allowance
and Marital
Status
Employee
Name
Akin, J.
PROBLEM 7A-4 (CONCLUDED)
FICA – OASDI
$ 398.66
FICA – Medicare
FUTA ($800 x 0.6%)
SUTA ($800 x 5%)
Total
Dec.
5
Production Salaries Expense
3
6
3
0
00
9
8
9
3
3
3
4
4
SOLUTIONS TO SET B PROBLEMS
PROBLEM 7B-1
Hourly
# of Hours
Gross
Employee
Rate
Worked
Earnings