Question

10A-2. Ron works for the local supermarket. Ron's pay is $8 per hour for the first 40 hours each week. He receives time-and-a-half for any hours he works over 40. Ron's income tax withholding is 15% of gross pay for the federal government and 5% for the state. He also pays the FICA tax of 7.65% of his gross pay. Ron's employer pays mandatory union dues of $30, his share of the company-supplemented health insurance premium of $55, and a voluntary donation to a local charity of $35 directly from Ron's pay. Ron was looking forward to his paycheck this week since he had worked a total of 48 hours. He was excited about having some cash left over after making his car and rent payments. Required. 1. Calculate Ron's gross and net pays. How excited should Ron be? 2. Show the entry necessary for Ron's employer to record wage expense. 3. Show Ron's firm's entries necessary to record its payroll tax expenses (assume normal employer FICA and federal and state unemployment taxes). 4. Ron's firm pays $60 toward his health insurance premium as a fringe benefit. They also contribute $30 per week to a pension plan. Show Ron's firm's entries necessary to record its employee fringe benefit expense. 5. How much total money does Ron's company pay him for his work? Compare this to the amount Ron gets at the end of the week as calculated in requirement 1.

Answer 1

Answer-1
Statement showing Ron's Gross & net Pay
Particulars	Amount
Gross Pay	$ 416.00
(48 hrs @ 8+ 8 hrs @ 4)
Less: deductions
Federal Income tax @ 15%	$   62.40
State Income tax @ 5%	$   20.80
FICA taxes @7.65%	$   31.82
Local Charity	$   35.00
Union dues	$   30.00
Health insurane	$   55.00
Total Deductions	$ 235.02
Net pay	$ 180.98
Answer-2
Account titles	Debit	Credit
Wage Expenses	$ 416.00
FICA taxes payable		$   31.82
Federal income tax payable		$   62.40
State Income tax payable		$   20.80
Charity payable		$   35.00
Union dues payable		$   30.00
Health insurance payable		$   55.00
Wages Payable		$ 180.98
(being payroll recorded)
Answer-3
Account titles	Debit	Credit
Payroll tax Expenses	$   34.32
FICA taxes payable		$   31.82
FUTA payable @ 0.6%		$      2.50
SUTA Payable @ 5.4%		$   22.46
(being payroll tax recorded)
Answer -4
Account titles	Debit	Credit
Fringe benefit Expense	$   90.00
Fringe benefit payable		$   90.00
(being liability for benfits booked)
Answer-5
Ron's Gross pay is $ 416 whereas his net pay is $ 180.98, i.e 43.5% of his total earnings is what he is taking in his hand for personal living.