Rags to Riches, a clothing resale store, employs one salesperson, Dee Hunter. Hunter’s straight time wage is $400 per week, with time and a half pay for hours above 40. Rags to Riches withholds income tax (10%) and FICA tax (7.65%) from Hunter’s pay. Rags to Riches also pays payroll taxes for FICA (7.65%) and state and federal unemployment (5.4% and 0.8%, respectively). In addition, Rags to Riches contributes 6% of Hunter’s gross pay into her retirement plan. During the week ended December 26, Hunter worked 50 hours. Prior to this week, she had earned $2,000.
Requirements
(Round all amounts to the nearest dollar.)
1. Compute Hunter’s gross pay and net (take home) pay for the week.
2. Record the payroll entries that Rags to Riches would make for each of the following:
a. Hunter’s gross pay, including overtime
b. Expense for employee benefits
c. Employer payroll taxes
d. Payment of net pay to Hunter
e. Payment for employee benefits
f. Payment of all payroll taxes
3. How much was Rags to Riches’ total payroll expense for the week?