2
QuizMultiple Choice

Gross Pay vs. Net Pay

Question 2 • SHS Alt Personal Finance - 2021

Juanita receives her paycheck and knows that her gross pay and federal tax are correct. Using the fact that Social Security tax is 6.2% of gross pay, Medicare tax is 1.45% of gross pay and state tax is 19% of federal tax, determine if Juanita's net pay is correct. EarningsDeductions Week Ended Regular FED. SOC. MED STATEWITH. WITH. CARE. WITH.NET PAY11/17$1,020.00 $107.00 $63.24 $14.79 $20.33$814.64Choose the true statement below.

Answer
A
The net pay is correct.
B
The Social Security tax is not correct.
C
The Medicare tax is not correct.
D
The state tax is not correct.

Explanation

Social Security tax is 6.2% of $1,020, which is $63.24, and Medicare tax is 1.45% of $1,020, which rounds to $14.79. State tax is 19% of the $107 federal tax, or $20.33. The deductions total $205.36, so net pay is $1,020.00 − $205.36 = $814.64. Therefore, the statement “The net pay is correct” is true.

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