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College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756

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Chapter
Section
BuyFindarrow_forward

College Accounting, Chapters 1-27

23rd Edition
HEINTZ + 1 other
ISBN: 9781337794756
Textbook Problem

GROSS PAY, DEDUCTIONS, AND NET PAY Donald Chin works for Northwest Supplies. His rate of pay is $14.00 per hour, and he is paid 1½ times the regular rate for all hours worked in excess of 40 per week. During the last week of January of the current year, he worked 48 hours. Chin is married and claims three withholding allowances on his W-4 form. His weekly wages are subject to the following deductions:

(a) Employee federal income tax (use Figure 8-4 on pages 288 and 289)

(b) Social Security tax at 6.2%

(c) Medicare tax at 1.45%

(d) Health insurance premium, $85

(e) Credit union, $125

(f) United Way contribution, $10

REQUIRED

1. Compute Chin’s regular pay, overtime pay, gross pay, and net pay.

2. Journalize the payment of his wages for the week ended January 31, crediting Cash for the net amount.

1.

To determine

Compute Person C’s regular pay, overtime pay, gross pay, and net pay

Explanation

Gross pay:

Gross pay is a payment made to an employee for completion of work allocated by the company. Gross pay is computed by using normal hours worked by the employee with hourly wages rate.

Net pay:

Net pay is the amount of gross pay after deduction of taxes, and any other deductions.

Compute Person C’s regular pay, overtime pay, gross pay, and net pay:

Particulars

Amount in

 $

Amount in $
Regular pay (40 × $14.00)  560.00
Overtime pay (8 (1)× $21.00)  168.00
Gross pay 728.00
Deductions:  
Employee federal income tax27.00 
Social Security tax ($728× 6.2%) 45.14 
Medicare tax ($728 ×1

2.

To determine

Prepare journal entry to record the payment of wages for the week ended January 31, crediting Cash for the net amount.

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