Chapter 10, Problem 4PB

1.

To determine

Prepare a payroll register for Incorporation F for the week ended December 9, 20Y8.

Answer to Problem 4PB

Prepare a payroll register for Incorporation F for the week ended December 9, 20Y8.

Table (1)

Explanation of Solution

Payroll: The total payment that a company is required to pay to its employee for the services received is called as payroll.

Payroll withholding deduction: The amounts which the employer withheld from employees’ gross pay to deduct taxes such as federal income tax, state income tax, local income tax, and social security tax are called payroll withholding deduction.

Payroll register: A schedule which is maintained by the company to record the earnings, earnings withholdings, and net pay of each employee is referred to as payroll register.

Working notes:

Calculate regular pay for C.

  $\begin{array}{c}\text{Regular pay = 40 hours }\times \text{\$50 per hour}\\ =\$2,000\end{array}$

Calculate overtime pay for C.

  $\begin{array}{c}\text{Overtime pay = }\left(\text{52 hours}\text{– 40 hours}\right)\times \left(\$50\times 1.5\right)\\ \text{= 12 hours}\times \text{\$75 per hour}\\ \text{= \$900}\end{array}$

Calculate regular pay for J.

  $\begin{array}{c}\text{Regular pay = 36 hours }\times \text{\$52 per hour}\\ =\$1,872\end{array}$

Calculate regular pay for K.

  $\begin{array}{c}\text{Regular pay = 40 hours }\times \text{\$58 per hour}\\ =\$2,320\end{array}$

Calculate overtime pay for K.

  $\begin{array}{c}\text{Overtime pay = }\left(\text{45 hours}\text{– 40 hours}\right)\times \left(\$58\times 1.5\right)\\ \text{= 5 hours}\times \text{\$87 per hour}\\ \text{= \$435}\end{array}$

Calculate regular pay for M.

  $\begin{array}{c}\text{Regular pay = 37 hours }\times \text{\$45 per hour}\\ =\$1,665\end{array}$

Calculate regular pay for S.

  $\begin{array}{c}\text{Regular pay = 40 hours }\times \text{\$52 per hour}\\ =\$2,080\end{array}$

Calculate overtime pay for S.

  $\begin{array}{c}\text{Overtime pay = }\left(\text{46 hours}\text{– 40 hours}\right)\times \left(\$52\times 1.5\right)\\ \text{= 6 hours}\times \text{\$78 per hour}\\ \text{= \$468}\end{array}$

Calculate regular pay for W.

  $\begin{array}{c}\text{Regular pay = 40 hours }\times \text{\$50 per hour}\\ =\$2,000\end{array}$

Calculate overtime pay for W.

  $\begin{array}{c}\text{Overtime pay = }\left(\text{48 hours}\text{– 40 hours}\right)\times \left(\$50\times 1.5\right)\\ \text{= 8 hours}\times \text{\$75 per hour}\\ \text{= \$600}\end{array}$

Calculate regular pay for Y.

  $\begin{array}{c}\text{Regular pay = 40 hours }\times \text{\$54 per hour}\\ =\$2,160\end{array}$

Calculate overtime pay for Y.

  $\begin{array}{c}\text{Overtime pay = }\left(\text{43 hours}\text{– 40 hours}\right)\times \left(\$54\times 1.5\right)\\ \text{= 3 hours}\times 81\text{ per hour}\\ \text{= \$243}\end{array}$

Notes:

• • For calculating the value of total earnings (column 5), add the amounts of column 3, and column 4 of respective employee as given below:

  $\text{Total earnings = }\left(\text{Regular pay +}\text{Overtime pay}\right)$

• • For calculating social security tax (column 6), multiply total earnings (column 5) by 6% of respective employee as given below:

  $\text{Social security tax = 6\% }\times \text{Total earnings}$

• • For calculating Medicare tax (column 7), multiply total earnings (column 5) by 1.5% of respective employee as given below:

  $\text{Medicare tax = 1}\text{.5\% }\times \text{Total earnings}$

• • For calculating the value of total deductions (column 10), add the amounts of column 6, column 7, column 8,  and column 9 of respective employee as given below:

  $\text{Total deductions = }\left(\begin{array}{l}\text{Social security tax + Medicare tax }\\ \text{+ Federal income tax + Retirement savings}\end{array}\right)$

• • For calculating the value of net pay(column 11), subtract total deductions (column 10) from total earnings (column 5) as given below:

  $\text{Net pay = Total earnings – Total deductions}$

• • Sales salaries expense or office salaries expense (Column 13 or Column 14) = Total  earnings (Column 5)

2.

To determine

Journalize the entry to record payroll for the week.

Answer to Problem 4PB

Prepare journal entry to record payroll for the week.

Date		Accounts and Explanation			Post Ref	Debit  ($)	Credit ($)
		Sales Salaries Expense				16,743
		Office Salaries Expense				7,200
			Social Security Taxes Payable				1,436.58
			Medicare Taxes Payable				359.16
			Federal Income Taxes Payable				5,013.68
			Retirement Savings Deductions Payable				541.00
			Salaries payable				16.592.58
				(To record salaries expense and payroll deductions)

Table (2)

Explanation of Solution

• ■ Sales salaries expense is an expense and it decreases the equity value. So, debit it by $16,743.
• ■ Office salaries expense is an expense and it decreases the equity value. So, debit it by $7,200.
• ■ Social Security taxes payable is a liability and it is increased. So, credit it by $359.16.
• ■ Medicare taxes payable is a liability and it is increased. So, credit it by $359.16.
• ■ Federal Income taxes payable is a liability and it is increased. So, credit it by $5,013.68.
• ■ Retirement savings deductions payable is a liability and it is increased. So, credit it by $541.00.
• ■ Salaries payable is a liability and it is increased. So, credit it by $16.592.58.