Lightning Electronics is a midsize manufacturer of lithium batteries. The company’s payroll records for the November 1–14 pay period show that employees earned wages totaling $55,000 but that employee income taxes totaling $7,500 and FICA taxes totaling $2,875 were withheld from this amount. The net pay was directly deposited into the employees’ bank accounts.Required:What was the amount of net pay?Assuming Lightning Electronics also must pay $300 of unemployment taxes for this pay period, what amount would be reported as the total payroll costs?

Question
Asked Apr 20, 2019
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Lightning Electronics is a midsize manufacturer of lithium batteries. The company’s payroll records for the November 1–14 pay period show that employees earned wages totaling $55,000 but that employee income taxes totaling $7,500 and FICA taxes totaling $2,875 were withheld from this amount. The net pay was directly deposited into the employees’ bank accounts.


Required:

  1. What was the amount of net pay?

  2. Assuming Lightning Electronics also must pay $300 of unemployment taxes for this pay period, what amount would be reported as the total payroll costs?

 

 
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Expert Answer

Step 1

1.

Formula for Net pay as shown below:

Net pay = Gross pay - (Employee income tax + FICA taxes)

 

Step 2

Calculate Net pay:

Net pay = $55,000 -($7,500 + $2,875)

Net pay = $55,000 - $10,375

Net pay = $44,625

Step 3

2.

Calculate total payroll costs:

Total payroll costs = Gross pay + Unemployment taxes + FICA taxes

Total payroll c...

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