Problem 10.1A Computing gross earnings, determining deductions, journalizing pay

Question

Problem 10.1A Computing gross earnings, determining deductions, journalizing payroll transactions. LO 10-2, 10-3, 10-4, 10-5, 10-7

Kathy Burnett works for Triumph Industries. Her pay rate is $13.44 per hour and she receives overtime pay at one and one-half times her regular hourly rate for any hours worked beyond 40 in a week. During the pay period that ended December 31, 2019, Kathy worked 42 hours. Kathy is married and claims three withholding allowances on her W-4 form. Kathy's cumulative earnings prior to this pay period total $29,000. Kathy's wages are subject to the following deductions:

Social Security tax at 6.2 percent

Medicare tax at 1.45 percent

Federal income tax (use the withholding table shown in Figure 10.2b)

Health and disability insurance premiums, $161

Charitable contribution, $18

U.S. Savings Bond, $100

Required:

Compute Kathy’s regular, overtime, gross, and net pay.

Assuming the weekly payroll has been recorded, journalize the payment of her wages for the week ended December 31, 2019.

Analyze:
Based on Kathy’s cumulative earnings through December 31, how much overtime pay did she earn this year?

Explanation / Answer

1. Kathy's regular pay 13.44*40 = 537.6 Overtime pay 13.44*1.5*(42-40)= 40.32 Gross pay(537.6+40.32) 577.92 Net pay (as calculated below) 230.71 Calculations for Net pay Gross pay(537.6+40.32) 577.92 Less: Deductions: Social Security tax at 6.2 percent 577.92*6.2%= 35.83 Medicare tax at 1.45 percent 577.92*1.45%= 8.38 Federal income tax (Latest available figures) 24 Health and disability insurance premiums 161 Charitable contribution 18 U.S. Savings Bond 100 Total deductions 347.21 Net pay 230.71 2.   Journal entry Salaries Payable 230.71 Cash 230.71 3.Cumulative earnings, prior to this payroll 29000   Add: Gross pay for week ending December 31,2019 577.92 Gross pay for the Year 29577.92   Less: Regular pay40 hrs*52 weeks*13.44 27955.2   Overtime pay for the year 1622.72

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