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accounting_week_5.rtf[INSERT TITLE HERE] 1
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[INSERT TITLE HERE]
Student Name
Allied American University
Author Note
This paper was prepared for [INSERT COURSE NAME], [INSERT COURSE ASSIGNMENT] taught by [INSERT INSTRUCTOR’S NAME].
PART I: SHORT RESPONSE
Directions: Please respond to each of the following questions. Write at least 3 to 5 sentences for each question.
1. Compare and contrast an employee and an independent contractor.
2. Explain the difference between gross and net pay, including how each is calculated.
3. Define taxable earnings, how they relate to the payroll register, and how they are calculated.
4. Explain the similarities and differences in the payroll register and the employee's individual earnings record.
5. Explain what the debit to the Payroll Tax Expense account consists of, how it is determined, and when it is recorded.
6. Explain why employers might not be enthusiastic about employee requests for pay raises, aside from obvious reasons of the cost of the pay raise itself.
7. Compare and contrast payroll Forms 940 and 941.
8. Explain the difference between Form W-2 and W-4 including why each form is needed by employers to complete payroll activities.
PART II: APPLICATION
Directions: Please answer each of the following questions. Show your work as necessary.
1. James Company has the following payroll information for the week ended December 20:
Earnings
Name
Total
Hours
Beginning
Cumulative
Earnings
Regular
Overtime
Total
Ending
Cumulative
Earnings
Unemployment
Akers, M.
40
22,370.00
2,034.00
0.00
Cham, T.
41
91,800.00
2,500.00
0.00
Grim, W.
44
16,904.00
1,726.00
0.00
Liski, S.
45
32,850.00
2,986.00
0.00
Regal, J.
40
90,900.00
3,450.00
0.00
254,824.00
12,696.00
0.00
James Company
Payroll Register for Week Ended
December 20, 20--
Taxable Earnings
Deductions
Payments
Social
Security
Medicare
Federal
Income
Tax
State
Income
Tax
Social
Security
Tax
Medicare
Tax
Total
Net
Amount
Ck.
No.
298.40
59.68
1260
446.78
89.36
1261
285.14
57.03
1262
705.41
141.08
1263
678.57
135.71
1264
2,414.30
482.86
Taxable earnings for Social Security are based on the first $106,800. Taxable earnings for Medicare are based on all earnings. Taxable earnings for federal and state unemployment are based on the first $7,000. Employees are paid time-and-a-half for work in excess of 40 hours per week.
Instructions:
1.
Complete the payroll register below. Use 4.2 percent for calculating Social Security tax and 1.45 percent for calculating Medicare tax.
2.
Based on the payroll register you created, prepare the journal entry to record the payroll for the week of December 20, 20--.
Earnings
Name
Total
Hours
Beginning
Cumulative
Earnings
Regular
Overtime
Total
Ending
Cumulative
Earnings
Unemployment
Akers, M.
40
22,370.00
2,034.00
0.00
Cham, T.
41
91,800.00
2,500.00
0.00
Grim, W.
44
16,904.00
1,726.00
0.00
Liski, S.
45
32,850.00
2,986.00
0.00
Regal, J.
40
90,900.00
3,450.00
0.00
254,824.00
12,696.00
0.00
James Company
Payroll Register for Week Ended
December 20, 20--
Taxable Earnings
Deductions
Payments
Social
Security
Medicare
Federal
Income
Tax
State
Income
Tax
Social
Security
Tax
Medicare
Tax
Total
Net
Amount
Ck.
No.
298.40
59.68
1260
446.78
89.36
1261
285.14
57.03
1262
705.41
141.08
1263
678.57
135.71
1264
2,414.30
482.86
GENERAL JOURNAL
PAGE
Date
Description
Post.
Ref.
Debit
Credit
20--
Dec.
20
Wages Expense
Employees' Federal Income Tax Payable
FICA Taxes Payable
Employees' State Income Tax Payable
Wages Payable
2. Alpine Homes has the following payroll information for the week ended June 30. State income tax is computed as 20 percent of federal income tax.
Daily Time
Name
Earnings
at End of
Previous
Week
S
M
T
W
T
F
S
Pay
Rate
Federal
Income
Tax
Grant, L.
7,536.00
8
8
8
8
8
18.00
47.00
Hamm, R.
6,496.00
8
8
8
8
8
18.10
48.00
Lisk, J.
6,798.00
8
8
8
8
8
17.80
47.00
Myre, G.
9,589.00
8
8
8
8
5
8
19.25
77.00
Segel, T.
6,585.00
6
8
8
8
8
8
17.95
71.00
Torgel, I.
7,501.00
8
8
8
8
8
18.70
51.00
Taxable earnings for Social Security are based on the first $106,800. Taxable earnings for Medicare are based on all earnings. Taxable earnings for federal and state unemployment are based on the first $7,000. Employees are paid time-and-a-half for work in excess of 40 hours per week.
Instructions:
1.
Complete the payroll register. The Social Security tax rate is 4.2 percent, and the Medicare tax rate is 1.45 percent. Begin payroll checks with No. 2944.
2.
Prepare a general journal entry to record the payroll on June 30. The firm's general ledger contains a Wages Expense account and a Wages Payable account.
3.
Assuming that the firm has transferred funds from its regular bank account to its special payroll bank account, and that this entry has been made, prepare a general journal entry to record the payment of wages on June 30.
Earnings
Name
Total
Hours
Beginning
Cumulative
Earnings
Regular
Overtime
Total
Ending
Cumulative
Earnings
Unemployment
Grant, L.
Hamm, R.
Lisk, J.
Myre, G.
Segel, T.
Torgel, I.
Alpine Homes
Payroll Register for Week Ended
June 30, 20--
Taxable Earnings
Deductions
Payments
Social
Security
Medicare
Federal
Income
Tax
State
Income
Tax
Social
Security
Tax
Medicare
Tax
Total
Net
Amount
Ck.
No.
GENERAL JOURNAL
PAGE
Date
Description
Post.
Ref.
Debit
Credit
20--
June
30
Wages Expense
Employees' Federal Income Tax Payable
FICA Taxes Payable
Employees' State Income Tax Payable
Wages Payable
30
Wages Payable
Cash Payroll Bank Account
3. T. Powell, an employee of Daisy’s Day Care, worked 48 hours during the week of August 30. Her rate of pay is $21.50 per hour, and she receives time-and-a-half for work in excess of 40 hours per week. T. Powell is single and claims zero allowances on her W-4 form. Her YTD earnings before this pay period are $34,850 with wages subject to the following deductions:
a.)
Federal income tax, $152.
b.)
Social Security tax at 4.2 percent, with a wage limit of $106,800.
c.)
Medicare tax at 1.45 percent.
d.)
Medical insurance premium (after tax), $80.
e.)
United Way contribution. $55.
Instructions:
1.
Compute T. Powell’s regular pay, gross pay, and net pay.
2.
Record this pay information in T. Powell’s employee earnings record, using check number 152.
2.)
EMPLOYEE’S INDIVIDUAL EARNING RECORD
NAME
T. Powell
ADDRESS
EMPLOYEE NO.
SOC. SEC. NO.
MALE
FEMALE
PAY RATE
MARRIED
SINGLE
OVERTIME PAY
PHONE NO.
BATE OF BIRTH
HOURS
WORKED
EARNINGS
DEDUCTIONS
PERIOD ENDED
DATE PAID
REGULAR
OVERTIME
REGULAR
OVERTIME
TOTAL
END CUMULATIVE EARNINGS
FEDERAL INCOME TAX
Aug. 30
Aug. 30
DATE EMPLOYED
NO. OF EXEMPTIONS
PER HOUR
PER DAY
PER WEEK
PER MONTH
DEDUCTIONS
PAID
STATE INCOME TAX
SOCIAL SECURITY TAX
MEDICARE TAX
OTHER
TOTAL
NET AMOUNT
CK. NO.
4. Ice Cold Storage has the following payroll information for the week ended November 20. State income tax is computed as 20 percent of federal income tax. Use page 77 for general journal.
Deductions
Name
Beginning
Cumulative
Earnings
Total
Earnings
Federal
Income
Tax
State Income
Tax
Greg, L.
5,820.00
2,520.00
428.34
85.67
Karab, A.
104,200.00
2,688.00
470.34
94.07
Lott, R.
99,162.00
3,192.00
606.33
121.27
Sung, R.
77,275.00
2,016.00
293.54
58.71
Assumed tax rates are as follows:
a.
FICA: Social Security, 4.2 percent for each employee and 6.2 percent for the employer (on the first $106,800), and Medicare, 1.45 percent on all earnings for each employee.
b.
State unemployment tax, 5.4 percent on the first $7,000 for each employee.
c.
Federal unemployment tax, 0.6 percent on the first $7,000 for each employee.
Instructions:
1.
Complete the payroll register. Payroll checks begin with Ck. No. 6307 in the payroll register.
2.
Prepare a general journal entry to record the payroll as of November 20. The company's general ledger contains a Salary Expense account and a Salaries Payable account.
3.
Prepare a general journal entry to record the payroll taxes as of November 20.
4.
Journalize the entry to pay the payroll on November 22. (Assume that the company has transferred cash to the Cash Payroll Bank Account for this payroll.)
1.)
Taxable Earnings
Name
Beginning
Cumulative
Earnings
Total
Earnings
Ending
Cumulative
Earnings
Unemployment
Social
Security
Medicare
Greg, L.
Karab, A.
Lott, R.
Sung, R.
Ice Cold Storage
Payroll Register for Week Ended
November 20, 20--
Deductions
Payments
Federal
Income Tax
State
Income
Tax
Social
Security
Tax
Medicare
Tax
Total
Net
Amount
Ck. No.
Salary
Expense
Debit
2D2.)
GENERAL JOURNAL
PAGE
77
Date
Description
Post.
Ref.
Debit
Credit
20--
Nov.
20
Salary Expense
Employees' Federal Income Tax Payable
FICA Taxes Payable
($433.77 + $151.03)
Employees' State Income Tax Payable
Salaries Payable
Payroll register for week ended
November 20.
20
Payroll Tax Expense
FICA Taxes Payable
($640.33 + $151.03)
State Unemployment Tax Payable
($1,180.00 0.054)
Federal Unemployment Tax Payable
($1,180.00 0.006)
To record employer's share of
FICA taxes and employer's state
and federal unemployment taxes.
22
Salaries Payable
Cash Payroll Bank
Account
Paid salaries for week ended
November 20.
5. Hardy Company has the following balances in its general ledger as of September 1 of this year:
1.
FICA Taxes Payable (liability for August), $1,150.00 (employee and employer).
2.
Employees' Federal Income Tax Payable (liability for August), $908.00.
3.
Federal Unemployment Tax Payable (liability for July and August), $215.00.
4.
State Unemployment Tax Payable (liability for July and August), $1,262.75.
The company completed the following transactions involving the payroll during September and October:
Sept. 13
Issued check payable to City Bank for the monthly deposit of August FICA taxes and employees' federal income tax withheld.
30
Recorded the payroll entry in the general journal from the payroll register for September. The payroll register has the following column totals:
Sales salaries
$5,500.00
Office salaries
1,800.00
Total earnings
$7,300.00
Employees' federal income tax deductions
$1,932.57
Employees' Social Security tax deductions
306.60
Employees' Medicare tax deductions
105.85
Total deductions
2,345.02
Net pay
$4,954.98
30
Recorded payroll taxes. Employer pays appropriate FICA taxes. State unemployment tax is 5.4 percent, and federal unemployment tax is 0.6 percent. At this time, all employees' earnings are taxable for FICA and unemployment taxes.
30
Issued check from Cash Payroll Bank Account to pay salaries for the month.
Oct. 14
Issued check payable to City Bank for the monthly deposit of September FICA taxes (employee and employer matching) and employees' federal income tax withheld.
31
Issued check payable to the State Tax Commission for state unemployment tax for July, August, and September. The check was accompanied by the quarterly tax return.
31
Issued check payable to City Bank for the deposit of federal unemployment tax for the months of July, August, and September.
Instructions:
Record the transactions in the general journal, pages 41-42.
GENERAL JOURNAL
PAGE
41
Date
Description
Post.
Ref.
Debit
Credit
20--
Sept.
13
Employees' Federal Income Tax
Payable
FICA Taxes Payable
Cash
Issued check payable to City Bank
for federal tax deposit.
30
Sales Salary Expense
Office Salary Expense
Employees' Federal Income Tax
Payable
FICA Taxes Payable
($306.60 + $105.85)
Salaries Payable
Payroll register for September.
30
Payroll Tax Expense
FICA Taxes Payable
($7,300.00 0.062) +
($7,300.00 0.0145)
State Unemployment Tax Payable
($7,300.00 0.054)
Federal Unemployment Tax Payable
($7,300.00 0.006)
To record employer's share of
FICA taxes and employer's state
and federal unemployment taxes.
30
Salaries Payable
Cash Payroll Bank Account
Paid salaries for month ended
September 30.
GENERAL JOURNAL
PAGE
42
Date
Description
Post.
Ref.
Debit
Credit
20--
Oct.
14
Employees' Federal Income Tax
Payable
FICA Taxes Payable
($412.45 + $558.45)
Cash
Issued check payable to City
Bank for federal tax deposit.
31
State Unemployment Tax Payable
Cash
Issued check payable to State Tax
Commission for state
Unemployment tax for July,
August, and September.
31
Federal Unemployment Tax Payable
Cash
Issued check payable to City
Bank for federal unemployment
tax deposit for July, August, and
September.
6. Wilson Construction Company receive and paid a premium notice on January 5 for workers’ compensation insurance stating the rates for the new year. Estimated employees’ earnings for the year are as follows:
Classification
Estimated
Wages & Salaries
Rate per hundred
(percent)
Estimated
Premium
Construction
335,000
3.20
$10,720.00
Office Clerical
105,000
.18
189.00
$10,909.00
At the end of the year, the exact figures for the payroll are as follows:
Classification
Actual
Wages & Salaries
Rate per hundred
(percent)
Exact
Premium
Construction
337,500
3.20
$10,800.00
Office Clerical
106,500
.18
191.70
$10,991.70
Instructions:
1.
Record the entry in general journal for the January 5 payment of estimated premium.
2.
Record the adjusting entries on December 31 for the insurance expired and for the additional premium.
GENERAL JOURNAL
PAGE
42
Date
Description
Post.
Ref.
Debit
Credit
20--
Jan.
5
Prepaid Insurance Workers’ Compensation
Cash
record estimated premium for
workers’ compensation
Adjusting Entries
Dec.
31
Workers’ Compensation Ins. Expense
Prepaid Insurance Workers’ Compensation
31
Workers’ Compensation Insurance Expense
Workers’ Compensation Insurance Payable
