Kap 1 5th workbook te ch 11 PDF

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Summary

The explanation and the lectures were very intuitive and also not being read from a script. This gave a very personal touch to the entire course....

Description

Chapter 11 Payroll learning oBJeCTiVeS LO 1

Describe payroll accounting

LO 5

Prepare payroll registers

LO 2

Calculate gross pay and net pay

LO 6

Describe payroll controls

LO 3

Describe payroll liabilities, employer’s contributions and payroll payments

Appendix

LO 4

Record payroll liabilities, employer’s contributions and payroll payments

LO 7

Calculate statutory deductions

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assessment Questions aS-1 LO 1 2 Define gross pay. Gross pay is the amount earned by an employee before any statutory and voluntary deductions.

aS-2 LO 1 2 What is net pay? Net pay is the amount owed to an employee after deductions have been made; it is the take-home pay.

aS-3 LO 3 7 Define statutory deductions, and identify three statutory deductions in Canada. Statutory deductions are amounts that businesses must withhold from an employee’s gross pay. Three statutory deductions in Canada are CPP, EI and income tax.

aS-4 LO 3 Define voluntary deductions, and provide three examples of voluntary deductions. Voluntary deductions are amounts that businesses withhold from an employee’s gross pay with the employee’s permission. Examples of voluntary deductions can include union dues, charitable donations, professional fees, uniform allowances, pensions or medical coverage.

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Payroll

aS-5 LO 3 True or False: There is no maximum amount for the Canada Pension Plan (CPP) deductions, so employees will contribute to the CPP no matter how much they earn in a year. False. The CPP has a maximum amount each year. Once an employee reaches that amount, they no longer contribute to the CPP for the rest of the year.

aS-6 LO 3 How much must an employer contribute to CPP on behalf of its employees? The employer must match (pay 100%) the amount of CPP withheld from an employee’s pay.

aS-7 LO 3 Is there any limitation to the amount of Employment Insurance (EI) that will be deducted from an employee’s pay (i.e. age limit, exemption amounts or maximum deductions)? There is no age limit or exemption amount for EI. However, there is a yearly maximum that employees will have deducted from their pay.

aS-8 LO 3 How much must the employer contribute to EI on behalf of its employees? The employer must pay 140% of the amount of EI withheld from an employee’s pay.

aS-9 LO 3 True or False: The total cost of paying an employee is equal to the amount of gross pay the employee earns. False. The total cost of paying an employee includes the gross pay, plus other statutory and voluntary payments that the employer makes.

aS-10 LO 5 When would a company use a payroll register? A payroll register is used when there are many employees that must be paid.

aS-11 LO 6 What type of information is recorded in a payroll record and what is the information used for? A payroll record contains personal information about an employee, including their gross pay and all their deductions. The gross pay and deduction information is used at the end of the year to create tax forms (T4).

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aS-12 LO 6 Identify two payroll controls and briefly explain them. The person hiring should not be same person paying the employee. This ensures that the employee actually exists and is not made up. Management should ensure that employees actually work the hours they claim. This can be monitored by using a time clock to monitor start and stop times. Proper authorization should be required for pay increases. To avoid fraud, the person creating cheques should not be the same person signing the cheques. An imprest bank account can track payroll cheques and help prevent theft through payroll. aS-13 LO 6 How does an imprest bank account help control payroll? An imprest bank account is a separate account that only handles payroll cheques. Any attempt of theft through payroll will be caught because there is only enough cash in the imprest account to cover the payroll cheques.

aS-14 LO 3 7 Is there any limitation to the amount of income tax that will be deducted from an employee’s pay (i.e. age limit, exemption amounts or maximum amounts)? There are no age limits or maximum amounts that can be deducted for income taxes. Employees are given tax credits which exempt a portion of their earnings from income tax.

aS-15 LO 7 How much is the annual CPP exemption amount, and what does it mean for employees? The CPP exemption amount is $3,500 for 2019. It means that employees will not pay any CPP on the first $3,500 they earn each year although the exemption amount is spread evenly throughout the year.

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application Questions group a aP-1a LO 1 Payroll accounting is important to any business that has employees. Discuss the objectives and/or requirements and obligations of employees, government and the employer where payroll is concerned. Employees: Expect to be paid fairly and receive a timely and accurate paycheque Government: Provides legislation outlining employment standards that employers are obligated to follow, including minimum rates of pay, rate for vacation pay and required compensation for terminated employees Employers: Have a requirement to pay employees the amounts owed, to remit amounts deducted from employees to government and other organizations and to report their payroll tax expense based on gross pay

aP-2a LO 2 The records of Dipsum Soft Drinks show the following figures. Calculate the missing amounts. employee earnings Salaries for the month

6,700

Overtime Pay

2,200 8,900

Total Gross Pay Deductions and net Pay Withheld Statutory Deductions

3,000

Charitable Contributions

100

Medical Insurance

150

Total Deductions

3,250

Net Pay

5,650

aP-3a LO 2 Phineas Company has two employees who are paid on an hourly basis every week. Payroll information for the week ending June 28, 2019, is listed below. Overtime is paid on hours over 48 hours per week. employee

Hours

H. Farnsworth P. Fry

37 42

Hourly rate $16.25 19.00

income Tax $120.25 155.80

CPP $27.23 37.27

Calculate the gross pay and net pay for each employee.

484

employee H. Farnsworth

gross Pay 601.25

net Pay 444.03

P. Fry

798.00

592.00

ei $9.74 12.93

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aP-4a LO 3 Identify the following payroll deductions and expenses as statutory or voluntary, based on legislation. Description Income taxes

Statutory

Voluntary

X

Dental benefits

X

Union dues

X

Savings bond purchase

X

Uniform allowance

X

Tuition

X

Canada Pension Plan

X

Prescription coverage

X

Retirement deduction

X

Employment Insurance

X

Long-term disability

X

Professional dues

X

Charitable donations

X

Tools and safety apparel

X

aP-5a LO 2 3 4 An employer has calculated the following amounts for an employee during the last week of March 2019. Gross wages Income taxes Canada Pension Plan Employment Insurance

$1,500 331 73.07 24.30

required a)

Calculate the employee’s net pay. Net Pay = $1,500 − 331 − 73.07 − 24.30 = 1,071.63

b) Assuming the employer’s contribution is 100% for Canada Pension Plan and 140% for Employment Insurance, what is the employer’s total expense? CPP = $73.07

EI = $24.30 × 1.4 = $34.02

Total expenses = $1,500 + 73.07 + 34.02 = $1,607.09

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c)

Payroll

Prepare the journal entries to record payroll for the employee and record the employer’s contribution. JoUrnal Date

account Title and explanation

Debit

Credit

2019 Mar 31

Salaries Expense

1,500





Income Tax Payable



331



Canada Pension Plan Payable



73.07



Employment Insurance Payable



24.30



Cash



1,071.63



Record payroll













Mar 31

Employee Benefits Expense

107.09





Canada Pension Plan Payable



73.07



Employment Insurance Payable



34.02



Record additional employer expenses













aP-6a LO 2 3 4 An employee has the following information for her pay for the week ending September 27, 2019. Her employer contributes 100% toward CPP and 140% toward EI. Vacation pay is accrued at 4% of gross pay. Workers’ Compensation is 1% of gross pay. Hours Hourly Rate

38 $16.50

Income Tax

$100.32

Canada Pension Plan Employment Insurance

$28.54 $10.16

Union Dues

$20.00

Charitable Donations

$5.00

required a)

Prepare the journal entry to record the payroll entry for the employee. The employee will be paid immediately. JoUrnal Date

account Title and explanation

2019 Sep 27





Salaries and Wages Expense

Credit 

627.00 



Income Tax Payable



100.32



CPP Payable



28.54



EI Payable



10.16



Union Dues Payable



20.00

 

Charitable Donations Payable Cash

 

5.00 462.98



486

Debit

To record payroll for employee





Payroll

Chapter 11

b) Prepare the journal entry to record accrued vacation pay. JoUrnal Date

account Title and explanation

2019 Sep 27





Vacation Pay Expense



c)

Debit

Credit 

25.08 

Vacation Pay Payable



25.08



To record accrued vacation pay













Prepare the journal entry to record the employer’s payroll expense. JoUrnal Date

account Title and explanation

2019 Sep 27

Debit





Employee Benefits Expense

Credit 

49.03 



CPP Payable



28.54



EI Payable



14.22



Workers’ Compensation Payable





To record employer payroll expenses



6.27 

d) Prepare the journal entry on October 10, 2019, to record the cash payment for statutory amounts owed to the CRA. JoUrnal Date

account Title and explanation

2019 Oct 10





Credit 

CPP Payable

57.08 



EI Payable

24.38 



Income Tax Payable



e)

Debit

100.32 

Cash



181.78



To record payment to the government













Prepare the journal entry on October 20, 2019, to record the cash payment to Workers’ Compensation. JoUrnal Date

account Title and explanation

2019 Oct 20  

Debit





Workers’ Compensation Payable Cash To record payment for workers’ compensation

Credit 

6.27   

6.27 

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aP-7a LO 2 3 4 Sampson Company has three employees who are paid on an hourly basis, plus time and a half for hours in excess of 44 hours per week. Payroll information for the week ending August 16, 2019, is listed below. employee

Hourly income rate Tax

Hours

CPP

Union Dues

ei

A. Knopf

41

$14.25

$116.85

$26.36

$9.46

$10

B. Penguin

48

16.00

160.00

37.37

12.96

10

D. House

38

15.75

119.70

27.09

9.70

10

required a)

Calculate the gross pay for each employee and the amount the employer will have to pay for CPP and EI. employee

gross Pay

employer CPP

employer ei

A. Knopf

584.25

26.36

13.25

B. Penguin

800.00

37.37

18.14

D. House

598.50

27.09

13.57

$1,982.75

$90.82

$44.96

Total

b) Prepare the journal entries for the August 14 payroll and the employer’s portion of payroll. Employees will not be paid until the next week. JoUrnal Date 2019 Aug 16

Debit



 1,982.75 

Salaries Expense

Credit 



Income Tax Payable



396.55



CPP Payable



90.82



EI Payable



32.12



Union Dues Payable



30.00



Salaries Payable



1,433.26

  Aug 16

To record payroll





 Employee Benefits Expense



 135.78 



CPP Payable



90.82



EI Payable



44.96

 c)

account Title and explanation

To record employer's portion of payroll





Record the payment of the statutory deductions to the CRA on August 31, 2019. JoUrnal Date

account Title and explanation

2019 Aug 31

 396.55 



CPP Payable

181.64 



EI Payable



Cash To pay amount owing to the government

Credit 

Income Tax Payable



488

Debit



77.08   

655.27 

Payroll

Chapter 11

aP-8a LO 3 4 Bertrand Company has calculated the gross pay of one of its employees to be $2,500 semi-monthly. The company must pay 4% of the gross pay as vacation pay and 0.5% for Workers’ Compensation. The pay date is August 15, 2019. required a)

Calculate and prepare the journal entry for accrued vacation pay. JoUrnal Date

account Title and explanation

2019 Aug 15 



Credit

 100.00 

Vacation Pay Expense Vacation Pay Payable



Debit 



100.00



To record accrued vacation pay



b) Calculate and prepare the journal entry for Workers’ Compensation. JoUrnal Date

account Title and explanation

2019 Aug 15 

Debit

 Employee Benefits Expense



 12.50 

Workers’ Compensation Payable



Credit

 

To record workers' compensation

12.50 

aP-9a LO 2 3 4 5 The payroll records of Russon Corporation’s district office provided the following information for the weekly pay period ended December 27, 2019. employee Clay York

Hours 43

Hourly rate $12

income Tax

CPP

ei

Union Dues

$61

$24

$9

$10

Karen Cooper

46

15

101

34

12

10

Stephen James

48

17

134

42

14

10

Jessie Moore

40

14

66

25

9

10

note All employees are paid 1.5 times their hourly wage for hours worked in excess of 40 hours per week. The company contributes 100% for its share of CPP and 140% of EI.

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required a)

Calculate gross and net pay for each employee. Round all answers to the nearest whole number. gross income Pay Tax $534 $61 735 101

employee Clay York Karen Cooper Stephen James Jessie Moore Total

$24 34

$9 12

Union Dues $10 10

CPP

ei

employer's employer's Cost: CPP Cost: ei $430 $24 $13 578 34 17

net Pay

884 560

134 66

42 25

14 9

10 10

684 450

42 25

20 13

$2,713

$362

$125

$44

$40

$2,142

$125

$62

b) Prepare the payroll journal entries for December 27, 2019. JoUrnal Date

account Title and explanation

Debit

Credit

2019 Dec 27

Salaries and Wages Expense

2,713

Income Tax Payable

362

Pension Plan Payable

125

Employment Insurance Payable

44

Union Dues Payable

40

Salaries and Wages Payable

2,142

Record payroll Dec 27

Employees Benefits Expense

187

Pension Plan Payable

125

Employment Insurance Payable

62

Record additional employer expenses

c)

Prepare a journal entry to record cash payment of the payroll liabilities due to the CRA on January 15, 2020. JoUrnal Date 2020 Jan 15

account Title and explanation Inco...