Chapter 9.A, Problem 11BP

Calculating gross and net pay (Learning Objective 8) 20-25 min.

Lacey Simmons is a vice president at Boston State Bank. During 2018, she worked for the company all year at an $8,200 monthly salary. She also earned a year-end bonus equal to 8% of her annual salary.

Simmons’s federal income tax withheld during 2018 was $920 per month, plus $1,230 on her bonus check. State income taxes withheld came to $81 per month, plus $176 on the bonus. The FICA tax rate is 7.65%. Simmons authorized the following payroll deductions: United Fund contribution of 1.5% of total earnings and life insurance of $26 per month.

Boston State Bank incurred payroll tax expense on Simmons for FICA tax, SUTA tax, and FUTA tax. Use a 5.4% SUTA tax rate, and a 6% FUTA tax rate. The state unemployment wage base in the state where Simmons works is $43,000.

Requirements

1. 1. Compute Simmons’s gross pay, payroll deductions, and net pay during 2018.
2. 2. What was the bank’s total cost of employing Simmons in 2018?
3. 3. Prepare the bank’s summary journal entries to record
   1. a. Simmons s total earnings for the year, her payroll deductions, and her net pay. Debit Salary Expense and Executive Bonus Compensation Expense as appropriate. Credit appropriate liability accounts for the payroll deductions and Cash for net pay.
   2. b. Employer payroll taxes for Simmons.

Explanations are not required. Round all amounts to the nearest dollar.