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Chapter 11: 7RQ (page 603)

What is the difference between gross pay and net pay?

Short Answer

Expert verified

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.

Step by step solution

01

Gross Pay

Gross pay is the amount that is reported before any kind of deduction. In payroll accounting, several amounts like salary, wages, commission, and the bonus are earned by the employee before any kind of tax deduction or other deduction. That is the amount that is borne by the employer and is called gross pay.

02

Net pay

Net pay is the amount that is received by the opposite party. From gross pay after deduction what remains is called the net pay. Net pay is also called the take-home pay as the employee gets the amount after all deductions.

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Most popular questions from this chapter

When do businesses record warranty expenses, and why?

What are the three main characteristics of liabilities?

Question:The income statement for Vermont Communications follows. Assume VermontCommunications signed a 3-month, 3%, \(6,000 note on June 1, 2018, and that thiswas the only note payable for the company.

Vermont Communications

Income Statement

Year Ended July 31, 2018

Net Sales Revenue

\) 26,500

Cost of Goods Sold

12,200

Gross Profit

14,300

Operating Expenses:

Selling Expenses

\( 690

Administrative Expenses

1,550

Total Operating Expenses

2,240

Operating Income

12,060

Other Income and (Expenses):

Interest Expense

?

Total Other Income and (Expenses)

?

Net Income before Income Tax Expense

?

Income Tax Expense

2,410

Net Income

\) ?

Requirements

1. Fill in the missing information for Vermont鈥檚 year ended July 31, 2018, incomestatement. Round to the nearest dollar.

2. Compute the times-interest-earned ratio for the company. Round to twodecimals.

: O鈥機onner guarantees its vacuums for four years. Prior experience indicates that warranty costs will be approximately 6% of sales. Assume that O鈥機onner made sales totaling $200,000 during 2018. Record the warranty expense for the year.

Hugh Stanley manages a Dairy House drive-in. His straight-time pay is \(12 per hour, with time-and-a-half for hours in excess of 40 per week. Stanley鈥檚 payroll deductions include withheld income tax of 20%, FICA tax, and a weekly deduction of \)5 for a charitable contribution to United Way. Stanley worked 58 hours during the week.

Requirements

  1. Compute Stanley鈥檚 gross pay and net pay for the week. Assume earnings to date are $18,000.
  2. Journalize Dairy Houses wages expense accrual for Stanley鈥檚 work. An explanation is not required.
  3. Journalize the subsequent payment of wages to Stanley.
See all solutions

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