Question

Hours. 15 of these hours were overtime, and were required to be paid at 150% of the normal hourly rate. Lawrence's hourly rate is $12.

Lawrence is single, and had $400 of federal income tax withheld from his pay. Baylor is in a state without an income tax.
Lawrence's pay is subject to social security taxes at an (assumed) 6.5% rate and Medicare/Medicaid at an (assumed) 1.5% rate. He has not exceeded the annual base for social security taxes.
Baylor pays for workers' compensation insurance at a 4% rate. None of this cost is paid by the employee.
Baylor provides its employees with health care insurance, and pays 90% of the $500 per employee monthly
premium. The other 10% is paid by employees via payroll withholdings.
Lawrence participates in a tax-sheltered deferred savings plan and has 8% of his gross pay withheld each month. Baylor Health Systems provides a 75% matching contribution. In other words, for every dollar that Lawrence saves, Baylor will contribute an additional 75 cents.
Baylor's payroll is subject to federal (0.5%) and state (1.5%) unemployment taxes on each employee's gross pay, up to $8,000 per year. Lawrence had $6,000 of gross earnings in the months prior to June.
Lawrence participates in the Community Chest fund drive each month, via a $25 contribution that is with held from his pay.
(a) Complete Lawrence's paycheck and the remittance advice (i.e., "paycheck stub"). The blank worksheet will be very helpful for this portion of the assignment.
(b) Prepare journal entries for Lawrence's pay and the related payroll expenses.
(c) What is the total cost to Baylor for Lawrence's services during June?

Answer 1

**Step 1: Calculate the regular earnings.**

* Lawrence's regular rate is \\$12/hour.

* Lawrence worked 100 hours during the pay period.

* Therefore, Lawrence's regular earnings are \\$1,200 (100 hours * \\$12/hour).

**Step 2: Calculate the overtime earnings.**

* Lawrence worked 15 overtime hours during the pay period.

* The overtime rate is 150% of the regular rate, or \\$18/hour.

* Therefore, Lawrence's overtime earnings are \\$2,700 (15 hours * \\$18/hour).

**Step 3: Calculate the total earnings.**

* Lawrence's regular earnings are \\$1,200.

* Lawrence's overtime earnings are \\$2,700.

* Therefore, Lawrence's total earnings are \\$3,900.

**Step 4: Calculate the payroll taxes.**

* The FICA taxes are 6.2% for Social Security and 1.45% for Medicare.

* Therefore, the total FICA taxes are \\$371 (6.2% * \\$3,900 + 1.45% * \\$3,900).

* The workers' compensation insurance rate is 4%.

* Therefore, the workers' compensation insurance is \\$156 (4% * \\$3,900).

* Baylor pays 90% of the health insurance premium, or \\$450.

* Lawrence's contribution to the tax-sheltered deferred savings plan is \\$294.

* Baylor's matching contribution is \\$218.

* The Community Chest fund drive is a \\$25 deduction from Lawrence's pay.

**Step 5: Calculate the net pay.**

* Lawrence's total earnings are \\$3,900.

* The payroll taxes are \\$371.

* The workers' compensation insurance is \\$156.

* The health insurance premium is \\$50.

* Lawrence's contribution to the tax-sheltered deferred savings plan is \\$294.

* Baylor's matching contribution is \\$218.

* The Community Chest fund drive is \\$25.

* Therefore, Lawrence's net pay is \\$2,407 (3,900 - 371 - 156 - 50 - 294 - 25).

**Here is the completed paycheck and remittance advice:**

**Paycheck**

* **Employee Name:** Lawrence

* **Pay Period:** June 1-30, 2023

* **Hours Worked:** 100

* **Regular Rate:** \\$12/hour

* **Overtime Rate:** \\$18/hour

* **Regular Earnings:** \\$1,200

* **Overtime Earnings:** \\$2,700

* **Total Earnings:** \\$3,900

* **Deductions:**

* Federal Income Tax: \\$400

* FICA Taxes: \\$371

* Medicare Taxes: \\$129

* Workers' Compensation Insurance: \\$156

* Health Insurance Premium: \\$50

* Tax-Sheltered Deferred Savings Plan: \\$294

* Community Chest Fund Drive: \\$25

* **Net Pay:** \\$2,407

**Remittance Advice**

* **Payee:** Lawrence

* **Amount:** \\$3,900

* **Deductions:**

* Federal Income Tax: \\$400

* FICA Taxes: \\$371

* Medicare Taxes: \\$129

* Workers' Compensation Insurance: \\$156

* Health Insurance Premium: \\$50

* Tax-Sheltered Deferred Savings Plan: \\$294

* Community Chest Fund Drive: \\$25

* **Net Pay:** \\$2,407

**Journal Entries**

* **Date:** June 30, 2023

* **Account:** Debit | Credit

* **Salaries Expense:** \\$3,900

* **FICA Taxes Payable