4.03 Notes – Payroll
Calculating Payroll Tax Withholding
Employee Social Security & Medicare (FICA)
Total Earnings
X
=
Total Earnings
X
=
Social
Security Tax
Deduction
Medicare Tax
Deduction
Employee Federal Income Tax Withholding – Calculated using tax tables
Employee State Income Tax Withholding – Calculated using tax tables or state rates
Calculating an Employee’s Paycheck
Total
Earnings
MINUS
MINUS
MINUS
_______
_______
_______
MINUS
_______
Income
Tax
Income Tax
Withholding Withholding Withholding Withholding
MINUS
EQUALS
_______
_______
(Paycheck
Amount)
Deductions
Calculating an Employee’s Total Earnings
1.
2.
3.
4.
Calculate the regular earnings by multiplying regular hours times the regular rate.
Calculate the overtime rate by multiplying the regular rate times 1 ½.
Calculate the overtime earnings by multiplying overtime hours times the overtime rate.
Add the regular earnings and the overtime earnings to calculate the total earnings.
Payroll Register. Record notes below.
Regular Pay
+
Overtime Pay
=
Total Earnings
-
Deductions
=
Net Pay
4.03 Key Terms for Preparing Payroll
Term
Payroll
Salary
Pay period
Payroll clerk
Gross earnings
Hourly wage
Time card
Commission
Piece rate
Overtime rate
Deduction
Withholding allowance
Form W-4
Social Security tax
Medicare tax
Tax base
Payroll register
Net pay
Employee Earnings Record
Accumulated earnings
Definition
4.03 Assessment – Payroll
Calculating Regular, Overtime, and Total Hours
1. Brenda worked 8 hours on Monday, 7 hours on Tuesday, 9 hours on Wednesday, 10 hours on Thursday, 8 hours
on Friday, and 4 hours on Saturday. Brenda’s rate of pay is $10 per hour. Calculate Brenda’s regular, overtime
and total hours for the week.
A. 39 Regular Hours, 7 Overtime Hours, and 46 Total Hours
B. 40 Regular Hours, 6 Overtime Hours, and 46 Total Hours
C. 43 Regular Hours, 3 Overtime Hours, and 46 Total Hours
D. 46 Regular Hours, No Overtime Hours, and 46 Total Hours
Calculating Gross Earnings
Smith Company has the following payroll information for their weekly pay period.
Name
Hours
Rate of
Commission
Sales
Worked
Pay
%
Mary
36
$12.00
2%
$2,500.00
David
42
$10.00
2%
$2,000.00
Figure 1
2. In Figure 1, what are David’s gross earnings for the pay period?
A.
B.
C.
D.
$420.00
$500.00
$470.00
$370.00
Calculating Deductions
Hap's Restaurant pays its employees weekly. Taxes are withheld based on the following percentages. Federal Income
Tax withholding is calculated using the IRS Tax Tables.
Social Security Withholding: 6.20%
Medicare Withholding: 1.45%
Federal Income Tax Withholding: Tax Withholding Tables
State Income Tax Withholding: 6.50%
Employee Name
Marital Status
Allowances
Megan Myers
M
0
James Jones
S
1
3. In Figure 2, what is the Medicare withholding for Megan?
A. $652.50
B. $65.25
C. $6.53
D. $0.65
Gross Pay
$450.00
$600.00
FIGURE 2
Calculating Net Pay
4. Simon has gross earnings of $975.00 and total deductions of $425.00. What is Simon’s net pay?
A.
B.
C.
D.
$550.00
$975.00
$1,300.00
$1,400.00
Journalizing a Payroll
5. Rusty's Auto has $2,500 in wages, $75.40 in Social Security withholding, $16.40 in Medicare withholding,
$100.00 in federal income tax withholding, and $80.00 in state income tax withholding. What is the correct
entry for recording the company’s payroll?
A.
B.
C.
D.
Debit Salary Expense $2,500, Cash $2,228.20; credit Social Security Tax Payable $75.40, Medicare Tax
Payable $16.40, Federal Income Tax Payable $100.00, State Income Tax Payable $80.00
Debit Salary Expense $2,500, Social Security Tax Payable $75.40,
Medicare Tax Payable $16.40, Federal Income Tax Payable $100.00,
State Income Tax Payable $80.00; credit Cash $2,228.20
Debit Salary Expense $2,500; credit Social Security Tax Payable $75.40, Medicare Tax Payable $16.40,
Federal Income Tax Payable $100.00, State Income Tax Payable $80.00, Cash $2,228.20
Debit Social Security Tax Payable $75.40, Medicare Tax Payable $16.40, Federal Income Tax Payable
$100.00, State Income Tax Payable $80.00; credit Salary Expense $2,500, Cash $2,228.20
Calculating Employer Payroll Taxes
Adam's Auto has $2,500.00 in wages, $103.00 in Social Security withholding, $51.75 in Medicare withholding, $300.00
in federal income tax withholding, and $90.00 in state income tax withholding. The federal unemployment tax rate is
0.8%.
FIGURE 3
6. In Figure 3, what is the employer’s federal unemployment tax for the pay period?
A. $2.00
B. $20.00
C. $200.00
D. $300.00
Journalizing Employer Payroll Taxes
7. Suzy's Shoppe has employer payroll taxes as follows: Social Security Tax $150.00, Medicare Tax $75.00 and
Federal Unemployment Tax $25.00. What is the entry to record the employer’s payroll taxes?
A. Debit Payroll Tax Expense $250.00, Credit Cash $250.00
B. Debit Payroll Tax Expense $250.00, Social Security Tax Payable $150.00; Credit Medicare Tax Payable
$75.00, Credit Federal Unemployment Tax Payable $25.00
C. Debit Payroll Tax Expense $250.00; Credit Social Security Tax Payable $150.00, Medicare Tax Payable
$75.00, Federal Unemployment Tax Payable $25.00
D. Debit Social Security Tax Payable $150.00, Medicare Tax Payable $75.00, Federal Unemployment Tax
Payable $25.00; Credit Payroll Tax Expense $250.00
Journalizing the Payment of Social Security, Medicare, and Federal Income Taxes
8. Danny's Diner paid the following taxes: Social Security $400.00, Medicare $150.00, Federal Income Tax
$500.00. What is the entry to journalize the payment of the payroll taxes?
A. Debit Cash $1,050.00; Credit Social Security Tax Payable $400.00, Medicare Tax Payable $150.00, Federal
Income Tax Payable $500.00
B. Debit Payroll Tax Expense $1,050.00, Credit Cash $1,050.00
C. Debit Social Security Tax Payable $400.00, Medicare Tax Payable $150.00, Federal Income Tax Payable
$500.00; Credit Cash $1,050.00
D. Debit Social Security Tax Payable $400.00, Medicare Tax Payable $150.00, Federal Income Tax Payable
$500.00; Credit Payroll Tax Expense $1,050.00
Journalizing the Payment of Federal Unemployment Taxes
9. Sarah's Stationery Store paid federal unemployment taxes of $75.00. What is the entry to journalize the
payment of the unemployment taxes?
A. Debit Cash $75.00; Credit Federal Unemployment Tax Payable $75.00
B. Debit Federal Unemployment Tax Payable $75.00, Credit Cash $75.00
C. Debit Federal Unemployment Tax Payable $75.00, Credit Payroll Tax Expense $75.00
D. Debit Payroll Tax Expense $75.00, Credit Cash $75.00