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Home work question on payroll

From Principles of Accounting 1: Textbook using: Horngren, C. & Harrison, W. (2007). Accounting (7th.ed.). Upper Saddle River, NJ: Pearson Prentice Hall.

Chapter 11, Problem E11-17

Cappy Scanlon manages the women's sportwear department of Parisian Department Store in Seattle. She earns a base monthly salary of $750 plus a 10% commission on her personal sales. Through payroll deductions, Scanlon donates $25 per month to a charitable organization, and she authorizes Parisian to deduct $50 monthly for her co-pay of health insurance. Tax rates on Scanlan's earnings are 12% for income tax and 8% of the first %$90,000 for FICA. During the first 11 months of the year, she earned $87, 000.

Requirement: Compute Scanlon's gross pay and net (take home) pay for December, assuming her sales for the month are $80,000. (refer to page 558 of the textbook). Hint: The net pay is $7,385.

My question is what am I doing wrong? I keep coming up with either more than the answer of $7,385 for net pay or under. The gross pay that I calculate is: $8750. Am I wrong there as well? How would you calculate this? Any and all help will be greatly appreciated. I am a student at Ashford University trying to earn my bachelor's degree in Accounting. This is an online school and the instructor is no help at all. I am desparate here, the assignment is due tomorrow, October 21, 2010.


  • Why don't you write out how you are getting your answer and then we can see where you are going wrong.

    Edit: I did a quick calculation and got the 7385. And yes, your gross pay is right.
  • Hint: Common errors occur when employee's get close to their FICA limits. Watch that section closely.
  • Thank you everyone, I found my mistake. I was deducting income and FICA at the same time and using the total of sales from the previous year. I need to relax and let my brain absorb the material and not stress so much!!
  • total of sales from the previous year
    Did not see that number in the problem - do you mean year to date compensation?
    Horngren is a good book - BUT I can see where some of the confusion on the part of accountants about how FIT withholding is computed comes from - for simplification, the problem indicates FIT withholding at 12%.
    I think I would have given the amount to withhold on the $750 and said the commission was supplemental and to use the optional flat rate :lol: