Question

Calculate Payroll

Breakin Away Company has three employees-a consultant, a computer programmer, and an administrator. The following payroll information is available for each employee:

	Consultant		Computer Programmer		Administrator
Regular earnings rate	$2,010 per week		$34 per hour		$40 per hour
Overtime earnings rate	Not applicable		1.5 times hourly rate		2 times hourly rate
Number of withholding allowances	3		2		1

For the current pay period, the computer programmer worked 60 hours and the administrator worked 50 hours. The federal income tax withheld for all three employees, who are single, can be determined by adding $356.90 to 28% of the difference between the employee's amount subject to withholding and $1,796.00. Assume further that the social security tax rate was 6%, the Medicare tax rate was 1.5%, and one withholding allowance is $70.

Determine the gross pay and the net pay for each of the three employees for the current pay period. Assume the normal working hours in a week are 40 hours. If required, round your answers to two decimal places.

	Consultant	Computer Programmer	Administrator
Gross pay	$	$	$
Net pay	$	$	$

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Gross pay represents the total earnings of an employee for a specific pay period, prior to taxes and deductions. Net pay is also known as take-home pay.

Locate the proper withholding wage bracket in the withholding table. Pay attention to the number of exemptions each employee is claiming.

Answer 1

	Consultant	Computer Programmer	Administrator
Regular Earnings	$2,010.00	$1,360.00	$1,600.00
Overtime Earnings		$1,020.00	$800.00
Gross Pay	$2,010.00	$2,380.00	$2,400.00
Less: Social security tax = 6% x Gross Pay	$120.60	$142.80	$144.00
Medicare tax = 1.5% x Gross Pay	$30.15	$35.70	$36.00
Federal income tax withheld	$358.02	$481.22	$506.42
	$508.77	$659.72	$686.42
Net Pay	$1,501.23	$1,720.28	$1,713.58
Working notes
Regular Earnings
Computer Programmer = 60 hours x $34 per hour	$2,040.00
Administrator = 40 hours x $40 per hour	$1,600.00
Overtime Earnings
Computer Programmer = 60 -40 hours x $34per hour x 1.5	$1,020.00
Administrator = (50-40 )hours x $40per hour x 2	$800.00
Federal income tax withheld
	Consultant	Computer Programmer	Administrator
Gross Pay	$2,010.00	$2,380.00	$2,400.00
Less: withhold allowance=  Number of withholding allowances x $70	210	140	70
Amount subject to withholding	$1,800.00	$2,240.00	$2,330.00
Initial withholding from wage bracket	356.9	356.9	356.9
Add: Bracket percentage over bracket excess	$1.12	$124.32	$149.52
Amount withheld	$358.02	$481.22	$506.42