Explanation Gross pay: The total amount earned by an employee in the form of salary, or wages, or commission, and bonus, before any taxes or deductions, is referred to as gross pay. Net pay: Net pay is the amount of gross pay after deduction of taxes, and any other deductions. Withheld income tax: The amount of income taxes deducted or withheld from gross pay is referred to as withheld income tax. Federal Insurance Contributions Act (FICA) tax: Federal government imposes taxes on the employees’ pay to provide benefits to retired, old age, orphans, and disabled. This tax is also referred to as Social Security tax because the program is devised to benefit the society. FICA tax includes two components, OASDI (Old age, survivors, and disability insurance), and Medicare (health insurance). 6.2 % is levied as OASDI component, and 1.45% as Medicare component. So, the total of FICA tax rate is 7.65% ( 6.2 % + 1.45 % ) , for all the employees on the first $118,500 of earnings, and another 1.45% on the earnings above $118,500. Calculate MG’s gross pay for the month of December . Details Amount ($) Amount ($) Base monthly salary $1,300 Sales made by G $115,000 Commission percentage × 8% Commission 9,200 Gross pay $10,500 Table (1) Calculate MG’s net pay for the month of December

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ISBN: 9780134728858

Author: Kemp

Publisher: PEARSON CO

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Chapter 9.A, Problem 8BE

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Ascertain MG’s gross pay and net pay for the month of December.

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Ch. 9.A - Calculate employee payroll (Learning Objective 8)...Ch. 9.A - Calculate net pay (Learning Objective 8) 5-10 min....Ch. 9.A - Employer payroll costs (Learning Objective 8) 5-10...Ch. 9.A - Prob. 4AE Ch. 9.A - Prob. 5AE Ch. 9.A - Prob. 6AE Ch. 9.A - Prob. 7BE Ch. 9.A - Prob. 8BE Ch. 9.A - Calculating gross and net pay (Learning Objective...Ch. 9.A - Calculating gross and net pay (Learning Objective...

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Ascertain MG’s gross pay and net pay for the month of December.

Solution Summary: The author calculates MG's gross pay and net pay for the month of December. The Federal Insurance Contributions Act (FICA) tax includes two components, OASDI and Medicare.

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