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Chapter 11: 7RQ (page 603)
What is the difference between gross pay and net pay?
The difference between the gross pay and net pay is the deductions that we made by the employer. Gross pay is the entitled benefit and net pay is the receivable benefit.
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Erin O’Neil Associates reported short-term notes payable and salaries payable as follows:
2018 | 2017 | |
Current Liabilities—partial: | ||
Short-term Notes Payable | \(16,900 | \) 16,000 |
Salaries Payable | 3,400 | 4,000 |
During 2018, O’Neil paid off both current liabilities that were left over from 2017, borrowed cash on short-term notes payable, and accrued salaries expense. Journalize all four of these transactions for O’Neil during 2018. Assume no interest on short-term notes payable of $16,000.
Question:Abernathy Electronics reported the following amounts on its 2018 income statement: Year Ended December 31, 2018 Net income $ 45,000 Income tax expense 6,750 Interest expense 3,750 What is Abernathy’s times-interest-earned ratio for 2018? (Round to two decimals.)
Question: Recording employee and employer payroll taxes County Company had the following partially completed payroll register:
| Earnings | Withholdings | ||||||||||
Beginning Cumulative Earnings | Current Period Earnings | Ending Cumulative Earnings | OASDI | Medicare | Income tax | Health Insurance | United way | Total Withholding | Net pay | Check No. | Salaries and Wages Expense |
\( 77,000 | \) 4,500 | \( 900 | \) 90 | \(15 | 801 | ||||||
112,000 | 7,200 | 1,200 | 144 | 35 | 802 | ||||||
48,000 | 3,300 | 600 | 66 | 0 | 803 | ||||||
61,000 | 3,300 | 850 | 66 | 20 | 804 | ||||||
0 | 4,500 | 1,100 | 90 | 0 | 805 | ||||||
\)298,000 | \(22,800 | \)4,650 | \(456 | \)70 | |||||||
Requirements
Lily Carter works for JDK all year and earns a monthly salary of \(12,100. There is no overtime pay. Lily’s income tax withholding rate is 10% of gross pay. In addition to payroll taxes, Lily elects to contribute 5% monthly to United Way. JDK also deducts \)250 monthly for co-payment of the health insurance premium. As of September 30, Lily had $108,900 of cumulative earnings. Requirements
1. Compute Lily’s net pay for October.
2. Journalize the accrual of salaries expense and the payment related to the employment of Lily Carter.
Curtis Company is facing a potential lawsuit. Curtis’s lawyers think that it is reasonably possible that it will lose the lawsuit. How should Curtis report this lawsuit?
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