An employee earns $65,000 annually and has the following deductions: federal income tax $8,500, state income tax $2,100, FICA $4,973, health insurance $1,800. What is the employee's net pay?
Correct Answer
B) $47,627
Net pay = Gross pay - Total deductions = $65,000 - ($8,500 + $2,100 + $4,973 + $1,800) = $65,000 - $17,373 = $47,627.
Why This Is the Correct Answer
Net pay is calculated by subtracting all deductions from gross pay. The employee's gross annual salary is $65,000, and the total deductions are $17,373 ($8,500 + $2,100 + $4,973 + $1,800). Subtracting the total deductions from gross pay gives us $65,000 - $17,373 = $47,627. This represents the actual amount the employee takes home after all mandatory and voluntary deductions.
Why the Other Options Are Wrong
Option A: $48,127
This answer ($48,627) is $1,000 higher than the correct answer, indicating a significant calculation error in the deduction totaling or subtraction process.
Option C: $49,127
This answer ($48,127) is $500 higher than the correct answer, suggesting an error in either adding the deductions or subtracting from gross pay.
Memory Technique
Remember 'FISH' for common payroll deductions: Federal tax, Insurance, State tax, FICA (Health insurance fits under Insurance)
Reference Hint
Business and Finance chapter covering payroll calculations and employee compensation in Florida contractor reference materials
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