CHAPTER 7 Employee Earnings and Deductions SOLUTION GENERAL JOURNAL DATE 1 2 20— July 3 4 5 6 7 8 9 10 11 DESCRIPTION PAGE POST. REF. DEBIT CREDIT 1 31 Salary Expense Employees' Federal Income Tax Payable FICA Taxes Payable ($248.00 + $223.20 + $58.00 + $52.20) United Way Payable Cash Paid salaries for the month (D. C. Garcia, $3,114.83, Ck. No. 6701; T. C. Bennett, $2,938.43, Ck. No. 6702). 7,600.00 2 582.34 581.40 3 4 5 383.00 6,053.26 12 6 7 8 9 10 11 12 DISCUSSION QUESTIONS Suggested Responses 292 1. The employee’s individual earnings record satisfies a government requirement and is a source of information for each employee’s W-2 form. 2. An employee’s individual earnings record contains current data on that employee’s earnings, deductions, and net pay for all pay periods, as well as cumulative earnings. 3. The purpose of the payroll register is to summarize the information about employees’ wages and salaries, withholdings, and deductions for a period of time. 4. An employee’s gross earnings are the total earnings before any deductions. Net earnings are the earnings remaining after deductions have been made and represent the employee’s take-home pay. 5. One check for the entire payroll is drawn from the regular bank account and deposited in a special payroll bank account. This avoids overloading a company’s regular bank account with numerous payroll checks, and it makes the bank statement for the regular bank account easier to reconcile. 6. Possible required deductions are federal income taxes, state income taxes, Social Security taxes, and Medicare taxes. Possible voluntary deductions are medical insurance premiums, union dues, charitable contributions, and payments to 401(k) plans. 7. An employee is a person who works under the direction and control of an employer. An independent contractor is a person who is engaged for a definite job or service and may choose his or her own means of doing the work. Examples of independent contractors are electricians, doctors, lawyers, architects, plumbers, exterminators, and carpenters who are not considered employees of a company. 8. To use the wage-bracket withholding table, you need to know the employee’s wage, filing status, number of exemptions, and frequency of pay. The tables are found in IRS Publication 15-T (formerly in Publication 15 (Circular E), Employer’s Tax Guide). © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 7 Employee Earnings and Deductions SOLUTIONS TO EXERCISES Exercise 7-1 a. b. 40 hours at straight time × $21.60 per hour 4 hours overtime × $32.40 per hour $864.00 129.60 Total gross pay $993.60 40 hours at straight time × $25.00 per hour 10 hours overtime × $37.50 per hour $1,000.00 375.00 Total gross pay $1,375.00 c. $20,885 × 0.08 $1,670.80 d. $81,600 ÷ 52 weeks = $1,569.23 per week $1,569.23 per week ÷ 40 hours = $39.23 per regular hour 40 hours at straight time × $39.23 per hour $1,569.20 176.55 3 hours overtime × $58.85 per hour $1,745.75 Exercise 7-2 a. 40 hours at straight time × $37.00 per hour b. 10 hours overtime × $55.50 per hour $1,480.00 555.00 c. Total gross pay $2,035.00 d. Federal income tax withholding e. Social Security tax withholding at 6.2 percent f. Medicare tax withholding at 1.45 percent g. Total withholding h. Net pay $256.81 126.17 29.51 412.49 $1,622.51 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 293 Aston, F. B. Dwyer, S. J. Flynn, K. A. Harden, J. L. Nguyen, H. Totals 294 Axton, C. Edgar, E. Gorman, L. Jolson, R. Nixel, P. EMPLOYEE Exercise 7-5 1. 2. 3. 4. 5. 6. Exercise 7-4 a. b. c. d. e. EMPLOYEE $ 900.00 920.00 1,110.00 1,025.00 925.00 $4,880.00 $ 71.00 64.00 82.00 100.00 64.00 $381.00 FEDERAL INCOME TAX WITHHELD $ 55.80 57.04 68.82 63.55 57.35 $302.56 SOCIAL SECURITY TAX WITHHELD 7,691.00 10,900.00 3,064.00 2,325.00 2,463.00 TOTAL EARNINGS 113,691.00 156,365.00 39,943.00 26,959.00 9,313.00 ENDING CUMULATIVE EARNINGS 0.00 0.00 0.00 0.00 150.00 UNEMPLOYMENT 800.00 0.00 3,064.00 2,325.00 2,463.00 SOCIAL SECURITY TAXABLE EARNINGS $13.05 13.34 16.10 14.86 13.41 $70.76 MEDICARE TAX WITHHELD 7,691.00 10,900.00 3,064.00 2,325.00 2,463.00 MEDICARE $ 25.00 25.00 25.00 25.00 25.00 $125.00 UNION DUES WITHHELD $ 35.00 35.00 40.00 40.00 35.00 $185.00 UNITED WAY WITHHELD © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 106,000.00 145,465.00 36,879.00 24,634.00 6,850.00 BEGINNING CUMULATIVE EARNINGS Total Earnings should be $7,944, not $7,494. Ending Cumulative Earnings should be $253,698, not $253,248. Social Security tax withheld should be $492.53, not $429.53. Total deductions should be $2,041.72, not $2,083.00. Net Amount should be $5,902.28, not $5,456.00. Wages Expense should be $7,944, not $7,494. 1 2 3 0 2 ALLOWANCES TOTAL EARNINGS Employee Earnings and Deductions Exercise 7-3 CHAPTER 7 $ 700.15 725.62 878.08 781.59 730.24 $3,815.68 NET PAY CHAPTER 7 Employee Earnings and Deductions Exercise 7-6 GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 20-Jan. POST. REF. DESCRIPTION PAGE DEBIT CREDIT 1 21 Sales Salary Expense Driver Salary Expense Office Salary Expense Employees' Federal Income Tax Payable FICA Taxes Payable ($2,127.96 + $497.67) Employees' Union Dues Payable Salaries Payable From payroll register. 14,960.00 10,692.00 8,670.00 2 3 4 5 3,975.00 2,625.63 560.00 27,161.37 6 7 8 9 10 11 11 12 12 Exercise 7-7 Regular earnings Overtime earnings Total earnings Federal income tax withheld State income tax withheld Social Security tax withheld Medicare tax withheld Charity withheld Total deductions Net pay BROWN RINGNESS TOTAL $ 3,500.00 146.00 $ 3,646.00 $ 268.07 53.61 226.05 52.87 35.00 $ 635.60 $3,010.40 $2,618.00 120.00 $2,738.00 $ 131.87 26.37 169.76 39.70 97.00 $ 464.70 $ 2,273.30 $6,118.00 266.00 $6,384.00 $ 399.94 79.98 395.81 92.57 132.00 $1,100.30 $5,283.70 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 295 CHAPTER 7 Employee Earnings and Deductions Exercise 7-8 GENERAL JOURNAL DATE 1 2 20-Sept. 3 4 5 6 7 8 9 10 11 12 DESCRIPTION PAGE POST. REF. DEBIT CREDIT 1 30 Salary Expense Employees' Federal Income Tax Payable Employees' State Income Tax Payable FICA Taxes Payable ($395.81 + $92.57) Charity Payable Cash--Brown Cash--Ringness Issued checks 981 and 982 for the month of September. 6,384.00 2 3 399.94 4 5 79.98 488.38 132.00 3,010.40 2,273.30 6 7 8 9 10 11 12 13 13 14 14 296 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. × $1,200.00 × $180.00 $45.00 per hour 4 hours OVERTIME PAY Gross pay Overtime pay Regular pay GROSS PAY $1,380.00 180.00 $1,200.00 85.56 20.01 30.00 32.00 Social Security tax Medicare tax Union dues Employee loan Net pay Total deductions $133.00 Federal income tax Less: Gross pay NET PAY 297 $1,079.43 300.57 $1,380.00 Employee Earnings and Deductions © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. $30.00 per hour 40 hours REGULAR PAY Problem 7-1A CHAPTER 7 298 40 40 40 16 40 48 Bills, D. Carney, W. Dorn, J. Edgar, L. Fitzwilson, G. TOTAL HOURS Arthur, P. NAME 4,690.00 19,530.00 276.00 276.00 0.00 0.00 0.00 0.00 0.00 OVERTIME EARNINGS HIGHRIDGE HOMES 4,966.00 1,196.00 600.00 352.00 518.00 500.00 1,800.00 TOTAL 24,496.00 5,346.00 3,287.00 1,100.00 2,603.00 2,560.00 9,600.00 ENDING CUMULATIVE EARNINGS 3,166.00 1,196.00 600.00 352.00 518.00 500.00 0.00 UNEMPLOYMENT 4,966.00 1,196.00 600.00 352.00 518.00 500.00 1,800.00 SOCIAL SECURITY 4,966.00 1,196.00 600.00 352.00 518.00 500.00 1,800.00 MEDICARE February 21, 20-- TAXABLE EARNINGS PAYROLL REGISTER FOR WEEK ENDED 401.15 115.00 26.00 0.00 14.00 13.00 233.15 FEDERAL INCOME TAX 307.89 74.15 37.20 21.82 32.12 31.00 111.60 72.00 17.34 8.70 5.10 7.51 7.25 26.10 MEDICARE TAX DEDUCTIONS SOCIAL SECURITY TAX © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 920.00 600.00 352.00 518.00 500.00 1,800.00 REGULAR 4,150.00 2,687.00 748.00 2,085.00 2,060.00 7,800.00 BEGINNING CUMULATIVE EARNINGS Employee Earnings and Deductions Problem 7-2A CHAPTER 7 781.04 206.49 71.90 26.92 53.63 51.25 370.85 TOTAL 4,184.96 989.51 528.10 325.08 464.37 448.75 1,429.15 NET AMOUNT CK. NO. 2085 2084 2083 2082 2081 2080 PAYMENTS CHAPTER 7 Employee Earnings and Deductions Problem 7-2A (concluded) GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 20-Feb. DESCRIPTION PAGE POST. REF. DEBIT CREDIT 1 21 Wages Expense Employees' Federal Income Tax Payable FICA Taxes Payable ($307.89 + $72.00) Wages Payable Payroll register for week ended February 21. 4,966.00 2 3 401.15 379.89 4,184.96 11 12 13 5 6 7 8 9 10 4 9 21 Wages Payable Cash--Payroll Bank Account Paid wages for week ended February 21. 4,184.96 10 4,184.96 11 12 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 299 44 40 45 40 44 43 Drew, W. Garen, S. North, O. Ovid, N. Ross, J. Springer, O. 300 42 48 Caris, A. TOTAL HOURS Bardin, J. NAME 831.24 95.64 123.00 0.00 160.50 0.00 129.00 259.20 63.90 OVERTIME EARNINGS ALPINE COMPANY 8,753.24 945.64 943.00 860.00 1,016.50 1,960.00 989.00 1,123.20 915.90 TOTAL 381,095.24 45,120.64 7,373.00 41,010.00 44,891.50 107,860.00 44,834.00 45,463.20 44,542.90 ENDING CUMULATIVE EARNINGS October 14, 20-- 570.00 0.00 570.00 0.00 0.00 0.00 0.00 0.00 0.00 UNEMPLOYMENT 7,693.24 945.64 943.00 860.00 1,016.50 900.00 989.00 1,123.20 915.90 SOCIAL SECURITY 8,753.24 945.64 943.00 860.00 1,016.50 1,960.00 989.00 1,123.20 915.90 MEDICARE TAXABLE EARNINGS PAYROLL REGISTER FOR WEEK ENDED 763.06 67.00 77.00 65.00 67.00 238.06 83.00 104.00 62.00 FEDERAL INCOME TAX 56.79 476.99 58.63 58.47 53.32 63.02 55.80 61.32 69.64 126.92 13.71 13.67 12.47 14.74 28.42 14.34 16.29 13.28 MEDICARE TAX DEDUCTIONS SOCIAL SECURITY TAX © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 850.00 7,922.00 44,175.00 820.00 860.00 856.00 1,960.00 860.00 864.00 852.00 REGULAR 372,342.00 6,430.00 40,150.00 43,875.00 105,900.00 43,845.00 44,340.00 43,627.00 BEGINNING CUMULATIVE EARNINGS Employee Earnings and Deductions Problem 7-3A CHAPTER 7 1,366.97 139.34 149.14 130.79 144.76 322.28 158.66 189.93 132.07 TOTAL 3945 CK. NO. 7,386.27 806.30 793.86 729.21 871.74 1,637.72 830.34 3952 3951 3950 3949 3948 3947 #REF! 3946 783.83 NET AMOUNT PAYMENTS CHAPTER 7 Employee Earnings and Deductions Problem 7-3A (concluded) GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 20-Oct. DESCRIPTION PAGE POST. REF. DEBIT CREDIT 1 14 Wages Expense Employees' Federal Income Tax Payable FICA Taxes Payable ($476.99 + $126.92) Wages Payable Payroll register for week ended October 14. 8,753.24 2 3 763.06 603.91 7,386.27 11 12 13 5 6 7 8 9 10 4 9 14 Wages Payable Cash--Payroll Bank Account Paid wages for week ended October 14. 7,386.27 10 7,386.27 11 12 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 301 47 Johnson, J. 40 Oscar, T. Troy, B. 302 41 43 Nord, P. 43 46 Ginny, N. 42 40 Fine, J. Maya, R. 40 Lund, D. 44 Don, V. TOTAL HOURS Albee, C. NAME 731,087.00 48,180.00 95,312.00 37,470.00 68,170.00 107,000.00 58,097.00 34,250.00 78,367.00 139,251.00 64,990.00 ENDING CUMULATIVE EARNINGS TITAN COMPANY 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 UNEMPLOYMENT 11,626.00 930.00 1,832.00 720.00 1,310.00 1,900.00 1,117.00 660.00 1,507.00 0.00 1,650.00 SOCIAL SECURITY TAXABLE EARNINGS 14,667.00 930.00 1,832.00 720.00 1,310.00 2,100.00 1,117.00 660.00 1,507.00 2,841.00 1,650.00 MEDICARE 1,806.04 76.00 241.15 44.00 133.00 308.15 103.00 35.00 161.72 508.37 195.65 FEDERAL INCOME TAX PAYROLL REGISTER FOR WEEK ENDED 720.80 57.66 113.58 44.64 81.22 117.80 69.25 40.92 93.43 0.00 102.30 SOCIAL SECURITY TAX AR AR 212.68 13.49 UW 26.56 UW 10.44 UW 19.00 30.45 UW 16.20 UW 9.57 UW 21.85 UW 41.19 360.00 20.00 25.00 20.00 70.00 20.00 25.00 35.00 25.00 95.00 25.00 AMOUNT 23.93 UW MEDICARE TAX DEDUCTIONS December 22, 20-- 3,099.52 167.15 406.29 119.08 303.22 476.40 213.45 120.49 302.00 644.56 346.88 TOTAL © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 930.00 14,667.00 47,250.00 1,832.00 720.00 1,310.00 2,100.00 1,117.00 660.00 1,507.00 2,841.00 1,650.00 TOTAL EARNINGS 716,420.00 93,480.00 36,750.00 66,860.00 104,900.00 56,980.00 33,590.00 76,860.00 136,410.00 63,340.00 BEGINNING CUMULATIVE EARNINGS Employee Earnings and Deductions Problem 7-4A CHAPTER 7 CK. NO. 11,567.48 762.85 2923 1,425.71 2922 600.92 2921 1,006.78 2920 1,623.60 2919 903.55 2918 539.51 2917 1,205.00 2916 2,196.44 2915 1,303.12 2914 NET AMOUNT PAYMENTS 12,890.00 930.00 1,832.00 720.00 1,310.00 2,100.00 1,507.00 2,841.00 1,650.00 SALES SALARY 1,777.00 1,117.00 660.00 OFFICE SALARY EXPENSE ACCOUNT DEBITED CHAPTER 7 Employee Earnings and Deductions Problem 7-4A (concluded) GENERAL JOURNAL DATE 1 2 3 4 5 6 7 8 9 10 11 20-Dec. DESCRIPTION PAGE POST. REF. DEBIT CREDIT 1 22 Sales Salary Expense Office Salary Expense Employees' Federal Income Tax Payable FICA Taxes Payable ($720.80 + $212.68) Accounts Receivable Employees' United Way Payable Salaries Payable Payroll register for week ended December 22. 12,890.00 1,777.00 2 3 4 1,806.04 933.48 165.00 195.00 11,567.48 14 15 16 6 7 8 9 10 11 12 13 5 12 22 Salaries Payable Cash--Payroll Bank Account Paid wages for week ended December 22. 11,567.48 13 11,567.48 14 15 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 303 304 × $700.00 × $210.00 $26.25 per hour 8 hours Gross pay Overtime pay Regular pay GROSS PAY $910.00 210.00 $700.00 56.42 13.20 32.00 44.75 Social Security tax Medicare tax Union dues Employee loan Net pay Total deductions $62.00 Federal income tax Less: Gross pay NET PAY © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. $17.50 per hour 40 hours REGULAR PAY OVERTIME PAY Employee Earnings and Deductions Problem 7-1B CHAPTER 7 $701.63 208.37 $910.00 40 40 46 40 Lisk, J. Myre, G. Segel, T. Torgel, I. 40 40 Hamn, R. TOTAL HOURS Grant, L. NAME Problem 7-2B 4,392.00 44,505.00 161.58 0.00 161.58 0.00 0.00 0.00 0.00 OVERTIME EARNINGS 4,553.58 748.00 879.58 770.00 712.00 724.00 720.00 TOTAL 49,058.58 8,249.00 7,464.58 10,359.00 7,510.00 7,220.00 8,256.00 ENDING CUMULATIVE EARNINGS 1,121.00 0.00 415.00 0.00 202.00 504.00 0.00 UNEMPLOYMENT 4,553.58 748.00 879.58 770.00 712.00 724.00 720.00 SOCIAL SECURITY 4,553.58 748.00 879.58 770.00 712.00 724.00 720.00 MEDICARE TAXABLE EARNINGS April 14, 20-- 297.00 47.00 67.00 52.00 43.00 44.00 44.00 FEDERAL INCOME TAX DEDUCTIONS 44.64 282.32 46.38 54.53 47.74 44.14 44.89 10.44 66.03 10.85 12.75 11.17 10.32 10.50 645.35 104.23 134.28 110.91 97.46 99.39 99.08 TOTAL 3,908.23 643.77 745.30 659.09 614.54 624.61 620.92 NET AMOUNT CK. NO. 305 2949 2948 2947 2946 2945 2944 PAYMENTS Employee Earnings and Deductions SOCIAL SECURITY MEDICARE TAX TAX © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 748.00 718.00 770.00 712.00 724.00 720.00 REGULAR 7,501.00 6,585.00 9,589.00 6,798.00 6,496.00 7,536.00 BEGINNING CUMULATIVE EARNINGS HARVEST COMPANY PAYROLL REGISTER FOR WEEK ENDED CHAPTER 7 CHAPTER 7 Employee Earnings and Deductions Problem 7-2B (concluded) GENERAL JOURNAL DATE 1 2 20-Apr. 3 4 5 6 7 8 DESCRIPTION POST. REF. PAGE DEBIT CREDIT 1 14 Wages Expense Employees' Federal Income Tax Payable FICA Taxes Payable ($282.32 + $66.03) Wages Payable Payroll register for week ended April 14. 4,553.58 2 3 297.00 348.35 3,908.23 4 5 6 7 8 9 9 14 Wages Payable Cash--Payroll Bank Account Paid wages for week ended April 14. 10 11 12 13 3,908.23 10 3,908.23 11 12 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 306 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 42 40 42 44 40 41 46 42 Dore, C. Gayle, A. Hale, R. Jilly, B. Karn, S. Ober, N. Wong, J. TOTAL HOURS Bolt, D. NAME Problem 7-3B 10,000.00 380,754.00 668.25 60.00 189.00 30.75 0.00 240.00 73.50 0.00 75.00 OVERTIME EARNINGS 10,668.25 860.00 1,029.00 850.75 1,980.00 1,840.00 1,053.50 1,980.00 1,075.00 TOTAL 391,422.25 28,112.00 7,824.00 30,788.75 37,134.00 107,740.00 33,783.50 138,220.00 7,820.00 ENDING CUMULATIVE EARNINGS 460.00 0.00 205.00 0.00 0.00 0.00 0.00 0.00 255.00 UNEMPLOYMENT 7,748.25 860.00 1,029.00 850.75 1,980.00 900.00 1,053.50 0.00 1,075.00 SOCIAL SECURITY 10,668.25 860.00 1,029.00 850.75 1,980.00 1,840.00 1,053.50 1,980.00 1,075.00 MEDICARE TAXABLE EARNINGS 1,141.37 55.00 89.00 53.00 295.70 208.06 83.00 260.61 97.00 FEDERAL INCOME TAX 480.40 53.32 63.80 52.75 122.76 55.80 65.32 0.00 66.65 SOCIAL SECURITY TAX 154.70 12.47 14.92 12.34 28.71 26.68 15.28 28.71 15.59 MEDICARE TAX DEDUCTIONS 1,776.47 120.79 167.72 118.09 447.17 290.54 163.60 289.32 179.24 TOTAL 8,891.78 739.21 861.28 732.66 1,532.83 1,549.46 889.90 1,690.68 895.76 NET AMOUNT CK. NO. 307 1870 1869 1868 1867 1866 1865 1864 1863 PAYMENTS Employee Earnings and Deductions © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 800.00 840.00 820.00 1,980.00 1,600.00 980.00 1,980.00 1,000.00 REGULAR 27,252.00 6,795.00 29,938.00 35,154.00 105,900.00 32,730.00 136,240.00 6,745.00 BEGINNING CUMULATIVE EARNINGS September 21, 20-- WILLIAMS COMPANY PAYROLL REGISTER FOR WEEK ENDED CHAPTER 7 CHAPTER 7 Employee Earnings and Deductions Problem 7-3B (concluded) GENERAL JOURNAL DATE 1 2 20-Sept. 3 4 5 6 7 8 DESCRIPTION PAGE POST. REF. DEBIT CREDIT 1 21 Wages Expense Employees' Federal Income Tax Payable FICA Taxes Payable ($480.40 + $154.70) Wages Payable Payroll register for week ended September 21. 10,668.25 2 3 1,141.37 635.10 8,891.78 4 5 6 7 8 9 9 21 Wages Payable Cash--Payroll Bank Account Paid wages for week ended September 21. 10 11 12 13 8,891.78 10 8,891.78 11 12 13 14 14 15 15 16 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 308 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. TOTAL HOURS 40 42 40 40 40 40 40 40 44 42 NAME Chang, C. Dugan, T. Fancher, K. Gannon, T. Jones, L. Lange, M. Milton, D. Naylor, B. Orton, A. Tiosha, J. Problem 7-4B 517,356.00 49,185.00 96,118.00 38,219.00 38,994.00 108,300.00 38,539.00 33,905.00 38,405.00 41,111.00 34,580.00 ENDING CUMULATIVE EARNINGS 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 0.00 UNEMPLOYMENT 11,131.00 1,065.00 1,780.00 720.00 1,310.00 600.00 750.00 660.00 725.00 2,841.00 680.00 SOCIAL SECURITY TAXABLE EARNINGS 12,631.00 1,065.00 1,780.00 720.00 1,310.00 2,100.00 750.00 660.00 725.00 2,841.00 680.00 MEDICARE 1,482.67 95.00 228.15 44.00 133.00 308.15 49.00 35.00 44.00 508.37 38.00 FEDERAL INCOME TAX 690.12 66.03 110.36 44.64 81.22 37.20 46.50 40.92 44.95 176.14 42.16 SOCIAL SECURITY TAX AR AR 183.15 15.44 UW 25.81 10.44 19.00 UW 30.45 UW 10.88 UW 9.57 10.51 UW 300.00 25.00 70.00 — 20.00 35.00 25.00 — 25.00 20.00 80.00 AMOUNT 41.19 UW 9.86 MEDICARE TAX DEDUCTIONS 201.47 434.32 99.08 253.22 410.80 131.38 85.49 124.46 745.70 170.02 TOTAL CK. NO. 9,975.06 863.53 2923 1,345.68 2922 620.92 2921 1,056.78 2920 1,689.20 2919 618.62 2918 574.51 2917 600.54 2916 2,095.30 2915 509.98 2914 NET AMOUNT PAYMENTS 9,121.00 1,065.00 1,780.00 720.00 1,310.00 725.00 2,841.00 680.00 SALES SALARY 309 3,510.00 2,100.00 750.00 660.00 OFFICE SALARY EXPENSE ACCOUNT DEBITED Employee Earnings and Deductions 2,655.94 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 1,065.00 12,631.00 48,120.00 1,780.00 720.00 1,310.00 2,100.00 750.00 660.00 725.00 2,841.00 680.00 TOTAL EARNINGS 504,725.00 94,338.00 37,499.00 37,684.00 106,200.00 37,789.00 33,245.00 37,680.00 38,270.00 33,900.00 BEGINNING CUMULATIVE EARNINGS December 29, 20-- BEST SPORTS COMPANY PAYROLL REGISTER FOR WEEK ENDED CHAPTER 7 CHAPTER 7 Employee Earnings and Deductions Problem 7-4B (concluded) GENERAL JOURNAL DATE 1 2 20-Dec. 3 4 5 6 7 8 9 10 11 DESCRIPTION PAGE POST. REF. DEBIT CREDIT 1 29 Sales Salary Expense Office Salary Expense Employees' Federal Income Tax Payable FICA Taxes Payable ($690.12 + $183.15) Accounts Receivable Employees' United Way Payable Salaries Payable Payroll register for week ended December 29. 9,121.00 3,510.00 29 Salaries Payable Cash--Payroll Bank Account Paid wages for week ended December 29. 9,975.06 2 3 4 1,482.67 873.27 150.00 150.00 9,975.06 5 6 7 8 9 10 11 12 12 13 14 15 16 13 9,975.06 14 15 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 310 © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. CHAPTER 7 Employee Earnings and Deductions SOLUTIONS TO ACTIVITIES CONSIDER AND COMMUNICATE Suggested Response It is true that a second bank reconciliation would be necessary if there were a payroll bank account. There might also be additional service charges, depending on the bank and the type of checking account. However, the primary advantage of using a second account dedicated to payroll is that payroll funds are separated from the general checking account funds. The reconciliation of both accounts is simplified because of the separation of checking accounts and it limits the number of people who have access to the payroll records. A QUESTION OF ETHICS Suggested Response This action is neither unethical nor illegal. An employee may claim fewer allowances than he or she is entitled to claim. Some people choose to have more taxes deducted because they do not want to owe taxes on April 15 of the next year. However, this practice is not encouraged unless one is extremely familiar with his or her tax position. Penalties may occur if there is no legal basis for the number of allowances claimed. © 2011 Cengage Learning. All Rights Reserved. May not be scanned, copied, duplicated, or posted to a publicly accessible website, in whole or in part. 311