Page of 4 An employee receives an hourly rate of $18, with time and a half for a
ID: 2391539 • Letter: P
Question
Page of 4 An employee receives an hourly rate of $18, with time and a half for all hours worked in excess of 40 during a week. Payroll data for the current week are as follows: hours worked, 52: federal income tax withheld, $175: cumulative earnings for year prior to curent week security tax rate. 6.2% on maximum of $100.000: and Medicare tax rate, 1.45% on all earnings. 2. , $99,700; social a) What is the employee's gross pay? b) What is the net amount to be paid to the employee? c) What is the employer's portion of FICA? 3. What is a liability (textbook)? List and define the types of liabilities.Explanation / Answer
2.
a.
Calculate the employee’s gross pay as follows:
Employee’s gross pay = Total wages earned prior to current the week + current week’s earnings
=$99,700 + (18*40+18*1.5*12)
=$100,744.
Therefore, the employee’s gross pay is $100,744.
b.
Net amount to be paid to the employee is calculated as under:
Net pay = Gross earnings for the week – Federal income tax withheld – social security tax withheld – Medicare tax withheld
=(18-40+18*1.5*12) - $175 – (100000-99700)*6.2% - 1044*1.45%
=1044 – 175 – 18.6 – 15.14
=$835.26
Therefore, the employee’s net earnings are $835.26.
c.
Calculate the employer’s portion of FICA as follows:
Employer’s portion of FICA = the employee’s contribution towards social security tax and Medicare tax
=18.6 + 15.14
=$33.74
Therefore, the employer’s portion of FICA is $33.74.
3.
Liability: A liability can be defined as an obligation of a person or organization to be fulfilled in future.
Some of the major types of liabilities are listed below:
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