Appendix F: Payroll Accounting

APPENDIX F
Payroll Accounting
ASSIGNMENT CLASSIFICATION TABLE
Brief A B
Learning Objectives Questions Exercises Exercises Problems Problems
1. Compute and record the 1, 2, 3, 5, 1, 2 1, 2, 3, 4 1A, 2A, 3A 1B, 2B, 3B

payroll for a pay period. 6, 7, 8
2. Describe and record 2, 3, 4, 8 3 3, 5 1A, 2A, 3A 1B, 2B, 3B

employer payroll taxes.
3. Discuss the objectives of 9, 10 4 4A 4B

internal control for payroll.
Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only) F-1
ASSIGNMENT CHARACTERISTICS TABLE
Problem Difficulty Time

Number Description Level Allotted (min.)
F-1A Prepare payroll register and payroll entries. Simple 30–40
F-2A Journalize payroll transactions and adjusting entries. Moderate 30–40
F-3A Prepare entries for payroll and payroll taxes; prepare Moderate 30–40
W-2 data.
F-4A Identify internal control weaknesses and make Simple 20–30

recommendations for improvement.
F-1B Prepare payroll register and payroll entries. Simple 30–40
F-2B Journalize payroll transactions and adjusting entries. Moderate 30–40
F-3B Prepare entries for payroll and payroll taxes; prepare Moderate 30–40
W-2 data.
F-4B Identify internal control weaknesses and make Simple 20–30

recommendations for improvement.
F-2 Copyright © 2013 John Wiley & Sons, Inc. Weygandt Financial, IFRS, 2/e, Solution’s Manual (For Instructor Use Only)
ANSWERS TO QUESTIONS
1. Gross pay is the amount an employee actually earns. Net pay, the amount an employee is paid, is
gross pay reduced by both mandatory and voluntary deductions, such as FICA taxes, union dues,
federal income taxes, etc. Gross pay should be recorded as wages or salaries expense.
2. Both employees and employers are required to pay FICA taxes.
3. No. When an employer withholds federal or state income taxes from employee paychecks, the
employer is merely acting as a collection agent for the taxing body. Since the employer holds
employees’ funds, these withholdings are a liability for the employer until they are remitted to the
government.
4. FICA stands for Federal Insurance Contribution Act; FUTA stands for Federal Unemployment Tax
Act; and SUTA stands for State Unemployment Tax Act.
5. A W-4 statement shows the employee’s name, address, social security number, marital status and
the number of allowances claimed for income tax withholding purposes. A W-2 statement contains
the employee’s name, address, social security number, wages, tips, other compensation, social security
taxes withheld, wages subject to social security taxes, and federal, state and local income taxes
withheld.
6. Payroll deductions can be classified as either mandatory (required by law) or voluntary (not
required by law). Mandatory deductions include FICA taxes and income taxes. Examples of
voluntary deductions are health and life insurance premiums, pension contributions, union
dues, and charitable contributions.
7. The employee earnings record is used in: (1) determining when an employee has earned the
maximum earnings subject to FICA taxes, (2) filing state and federal tax returns, and
(3) providing each employee with a statement of gross earnings and tax withholdings for the
year.
8. (a) The three types of taxes are: (1) FICA, (2) federal unemployment, and (3) state unemployment.
(b) The tax liability accounts are classified as current liabilities in the balance sheet. Payroll tax
expense is classified under operating expenses in the income statement.
9. The main internal control objectives associated with payrolls are: (1) to safeguard company
assets from unauthorized payments of payrolls and (2) to assure the accuracy and reliability of
the accounting records pertaining to payrolls.
10. The four functions associated with payroll are: (1) hiring employees, (2) timekeeping, (3) preparing the
payroll, and (4) paying the payroll.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE F-1
Gross earnings:
Regular pay (40 X $16) ............................................ $640.00
Overtime pay (7 X $24)............................................ 168.00 $808.00
Gross earnings................................................................ $808.00

Less: FICA taxes payable ($808 X 7.65%).................... $ 61.81
Federal income taxes payable............................ 95.00 156.81
Net pay ............................................................................. $651.19
BRIEF EXERCISE F-2
Jan. 15 Salaries and Wages Expense ....................... 808.00

FICA Taxes Payable ($808 X 7.65%) ..... 61.81
Federal Income Taxes Payable ............. 95.00
Salaries and Wages Payable................. 651.19
Jan. 15 Salaries and Wages Payable ........................ 651.19

Cash ........................................................ 651.19
BRIEF EXERCISE F-3
Jan. 31 Payroll Tax Expense...................................... 11,634

FICA Taxes Payable ($84,000 X 7.65%) 6,426
Federal Unemployment Taxes
Payable ($84,000 X .8%)..................... 672
State Unemployment Taxes Payable
($84,000 X 5.4%) ................................. 4,536
BRIEF EXERCISE F-4
(a) Timekeeping (c) Preparing the payroll

(b) Hiring (d) Paying the payroll
SOLUTIONS TO EXERCISES
EXERCISE F-1
(a) 1. Regular 40 X $14.00 = $560.00

Overtime 4 X $21.00 = 84.00
Gross earnings $644.00
2. FICA taxes—$49.27 = ($644 X 7.65%).
3. Federal income taxes $55.
4. State income taxes $12.88 = ($644 X 2%).
5. Net pay $498.85 = ($644.00 – $49.27 – $55.00 – $12.88 – $28.00).
(b) Salaries and Wages Expense .................................... 644.00

FICA Taxes Payable............................................ 49.27
Federal Income Taxes Payable.......................... 55.00
State Income Taxes Payable.............................. 12.88
Health Insurance Payable .................................. 28.00
Salaries and Wages Payable ............................. 498.85
EXERCISE F-2
D. Edwards $4,200 X 7.65% = $321.30 Edwards’s total gross earnings for

the year are $87,700 ($83,500 + $4,200), which is below the
$106,800 maximum for FICA taxes.
M. Ihrke ($1,200 X 6.2%) + ($4,200 X 1.45%) = $135.30. Ihrke’s total

gross earnings for the year are $109,800. Thus, only $1,200
of the gross earnings ($4,200 – $3,000) for this pay period
are subject to Social Security taxes. In addition, $4,200 is
subject to Medicare (1.45%) taxes.
A. Seligman ($2,300 X 6.2%) + ($4,200 X 1.45%) = $203.50. Seligman’s total

gross earnings for the year are $108,700. Thus, only $2,300
of the gross earnings ($4,200 – $1,900) for this pay period
are subject to Social Security taxes.
EXERCISE F-2 (Continued)
P. Paik ($4,200 X 1.45%) = $60.90 Paik’s gross earnings prior to this

pay period equal the maximum amount subject to Social
Security taxes. However, all of the gross earnings in the
December 31 pay period are subject to Medicare taxes.
EXERCISE F-3
(a) See next page.
(b) Jan. 31 Salaries and Wages Expense............... 1,721.00

FICA Taxes Payable ...................... 131.65
Federal Income Taxes Payable .... 135.00
Health Insurance Payable............. 48.00
Salaries and Wages Payable ........ 1,406.35
Copyright © 2013 John Wiley & Sons, Inc.
(a) WELSTEAD COMPANY
Payroll Register
For the Week Ending January 31
Earnings Deductions
Total Gross FICA Federal Health Net
Employee Hours Regular Overtime Pay Taxes Income Taxes Insurance Total Pay
W. Jeong 46 $ 440.00 $ 99.00 $ 539.00 $ 41.23 $ 34.00 $18.00 $ 93.23 $ 445.77
C. Garrison 42 520.00 39.00 559.00 42.76 43.00 15.00 100.76 458.24
J. Buss 43 560.00 63.00 623.00 47.66 58.00 15.00 120.66 502.34
Totals $1,520.00 $201.00 $1,721.00 $131.65 $135.00 $48.00 $314.65 $1,406.35
Weygandt Financial, IFRS, 2/e, Solution’s Manual

(For Instructor Use Only)
F-7
(b) Jan. 31 Payroll Tax Expense ................................. 238.35

FICA Taxes Payable .......................... 131.65
Payable ($1,721 X .8%).................. 13.77
State Unemployment Taxes
Payable ($1,721 X 5.4%)................ 92.93
EXERCISE F-4
(a) (1) $1,100 [$10,000 see (2) below – $8,900].

(2) $10,000 (FICA taxes $765 ÷ 7.65%).
(3) $400 ($10,000 X 4%).
(4) $2,660 ($10,000 – $7,340).
(5) $6,000($10,000 – $4,000).
(b) Feb. 28 Salaries and Wages Expense ............. 10,000

FICA Taxes Payable ..................... 765
Federal Income Taxes
Payable...................................... 1,395
State Income Taxes Payable ....... 400
Union Dues Payable..................... 100
Salaries and Wages Payable....... 7,340
28 Salaries and Wages Payable .............. 7,340

Cash .............................................. 7,340
EXERCISE F-5
(a) FICA tax ($786,000 X 6.2%) + ($850,000 X 1.45%).... $61,057

SUTA tax ($90,000 X 5.4%) ........................................ 4,860
FUTA tax ($90,000 X 0.8%)......................................... 720
Total payroll tax .................................................. $66,637
(b) Payroll Tax Expense .................................................. 66,637

FICA Taxes Payable ........................................... 61,057
State Unemployment Taxes Payable ................ 4,860
Federal Unemployment Taxes Payable ............ 720
(a) ETHRIDGE DRUG STORE
Payroll Register
For the Week Ended February 15, 2014

Earnings Deductions
Over- Gross
Employee Hours Regular time Pay FICA Fed. State U.F. Total Net Pay
A. Joseph 35 490.00 0 490.00 37.49 40.00 14.70 0 92.19 397.81
J. Wilgus 42 480.00 36.00 516.00 39.47 27.00 15.48 5.00 86.95 429.05
P. Kirk 44 480.00 72.00 552.00 42.23 57.00 16.56 7.50 123.29 428.71
PROBLEM F-1A
L. Zhang 48 480.00 144.00 624.00 47.74 52.00 18.72 5.00 123.46 500.54
Totals 1,930.00 252.00 2,182.00 166.93 176.00 65.46 17.50 425.89 1,756.11
SOLUTIONS TO PROBLEMS

F-9
PROBLEM F-1A (Continued)
(b) Feb. 15 Salaries and Wages Expense.............. 2,182.00

FICA Taxes Payable ..................... 166.93
Payable...................................... 176.00
State Income Taxes Payable ....... 65.46
United Fund Contributions Payable 17.50
Salaries and Wages Payable ....... 1,756.11
15 Payroll Tax Expense ............................ 302.22

FICA Taxes Payable
($2,182 X 7.65%) ....................... 166.93
Payable ($2,182 X .8%)............. 17.46
Payable ($2,182 X 5.4%)........... 117.83
(c) Feb. 16 Salaries and Wages Payable............... 1,756.11

Cash............................................... 1,756.11
(d) Feb. 28 FICA Taxes Payable

($166.93+ $166.93)............................ 333.86
Federal Income Taxes Payable ........... 176.00
Cash............................................... 509.86
PROBLEM F-2A
(a) Jan. 10 Union Dues Payable....................... 250.00

Cash......................................... 250.00
12 FICA Taxes Payable ....................... 662.20

Federal Income Taxes Payable ..... 1,254.60
Cash......................................... 1,916.80
15 U.S. Savings Bonds Payable......... 350.00

Cash......................................... 350.00
17 State Income Taxes Payable ......... 102.15

Cash......................................... 102.15
20 Federal Unemployment Taxes

Payable........................................ 312.00
Payable........................................ 1,954.40
Cash......................................... 2,266.40
31 Salaries and Wages Expense........ 46,200.00

FICA Taxes Payable ............... 3,534.30
Payable ................................ 1,770.00
State Income Taxes
Payable ................................ 360.00
Union Dues Payable ............... 400.00
United Fund Contributions
Payable ................................ 1,800.00
Salaries and Wages Payable . 38,335.70
31 Salaries and Wages Payable ......... 38,335.70

Cash......................................... 38,335.70
PROBLEM F-2A (Continued)
(b) Jan. 31 Payroll Tax Expense ............................ 6,398.70

FICA Taxes Payable
($46,200 X 7.65%) ................... 3,534.30
Payable ($46,200 X .8%) ......... 369.60
Payable ($46,200 X 5.4%) ....... 2,494.80
PROBLEM F-3A
(a) Salaries and Wages Expense ................................. 520,000

FICA Taxes Payable......................................... 35,440
Federal Income Taxes Payable....................... 153,000
State Income Taxes Payable........................... 13,520
United Fund Contributions Payable............... 25,000
Health Insurance Payable ............................... 26,800
Salaries and Wages Payable .......................... 266,240
(b) Payroll Tax Expense ............................................... 39,070

FICA Taxes Payable ........................................ 35,440
Federal Unemployment Taxes Payable
($110,000 X .8%)........................................... 880
($110,000 X 2.5%)......................................... 2,750
(c) Federal State

Wages, Income Income
Tips, Other Tax Tax FICA FICA Tax
Employee Compensation Withheld Withheld Wages Withheld
S. Brand $56,000 $20,500 $1,456 (1) $56,000 $4,284
R. Morin 27,000 11,000 702 (2) 27,000 2,066
(1) $56,000 X 2.6%.

(2) $27,000 X 2.6%.
PROBLEM F-4A
(a) Weaknesses (b) Recommended Procedures
1. Hours worked are marked Time cards should be

on time card by punched by a time clock and
employee. the punching of the clock by
employees should be
supervised so that one
employee cannot punch
more than one card.
Employees give the The manager should deliver

approved cards to payroll. the cards to payroll in order
to prevent possible altera-
tions by employees during
delivery.
2. Department manager Rates of pay should be

indicates the rates of pay. authorized in writing by
the human resources
department.
The department manager The treasurer’s department

pays the employees. should pay employees.
Payment is in cash. Payment should be made by

check.
3. Manager prepares payroll The payroll department

register which is sent to should prepare the payroll
the payroll department. register on the basis of the
clock cards approved by the
manager.
A payroll supervisor pays Payment to employees

each employee by check. should be made by the
treasurer’s department.
(a) RALPH’S HARDWARE
Payroll Register
For the Week Ending March 15, 2014
Earnings Deductions
Over- Gross
Employee Hours Regular time Pay FICA Fed. State U.F. Total Net Pay
K. Litwack 40 600.00 0 600.00 45.90 72.00 27.00 5.00 149.90 450.10
E. Burgess 42 520.00 39.00 559.00 42.76 41.00 25.16 5.00 113.92 445.08
R. Perez 44 520.00 78.00 598.00 45.75 60.00 26.91 8.00 140.66 457.34
H. Hosseini 48 520.00 156.00 676.00 51.71 67.00 30.42 5.00 154.13 521.87
PROBLEM F-1B
Totals 2,160.00 273.00 2,433.00 186.12 240.00 109.49 23.00 558.61 1,874.39

F-15
PROBLEM F-1B (Continued)
(b) Mar. 15 Salaries and Wages Expense.............. 2,433.00

FICA Taxes Payable ..................... 186.12
Payable...................................... 240.00
State Income Taxes Payable ....... 109.49
Payable...................................... 23.00
Salaries and Wages Payable ....... 1,874.39
15 Payroll Tax Expense ............................ 336.96

FICA Taxes Payable
($2,433 X 7.65%) ....................... 186.12
Payable ($2,433 X .8%)............. 19.46
Payable ($2,433 X 5.4%)........... 131.38
(c) Mar. 16 Salaries and Wages Payable............... 1,874.39

Cash............................................... 1,874.39
(d) Mar. 31 FICA Taxes Payable

($186.12 + $186.12)........................... 372.24
Federal Income Taxes Payable ........... 240.00
Cash............................................... 612.24
PROBLEM F-2B
(a) Jan. 10 Union Dues Payable....................... 740.00

Cash......................................... 740.00
12 FICA Taxes Payable ....................... 760.00

Federal Income Taxes Payable ..... 1,204.60
Cash......................................... 1,964.60
15 U.S. Savings Bonds Payable......... 360.00

Cash......................................... 360.00
17 State Income Taxes Payable ......... 108.95

Cash......................................... 108.95
20 Federal Unemployment Taxes

Payable........................................ 288.95
Payable........................................ 1,954.40
Cash......................................... 2,243.35
31 Salaries and Wages Expense........ 50,600.00

FICA Taxes Payable ............... 3,871.00
Payable ................................ 1,958.00
State Income Taxes
Payable ................................ 414.00
Payable ................................ 1,888.00
Union Dues Payable ............... 400.00
Salaries and Wages Payable . 42,069.00
31 Salaries and Wages Payable ......... 42,069.00

Cash......................................... 42,069.00
(b) 1. Jan. 31 Payroll Tax Expense .................... 7,008.20

FICA Taxes Payable
($50,600 X 7.65%) ................... 3,871.00
Payable ($50,600 X .8%) ......... 404.80
Payable ($50,600 X 5.4%) ....... 2,732.40
PROBLEM F-3B
(a) Salaries and Wages Expense ................................. 550,000

Federal Income Taxes Payable....................... 168,000
State Income Taxes Payable........................... 17,600
United Fund Contributions Payable............... 27,500
Health Insurance Premiums Payable............. 32,200
Salaries and Wages Payable .......................... 266,717
(b) Payroll Tax Expense ............................................... 42,108

Federal Unemployment Taxes Payable
($125,000 X .8%)........................................... 1,000
($125,000 X 2.5%)......................................... 3,125
(c) Federal State

Wages, Income Income
Tips, Other Tax Tax FICA FICA Tax
Employee Compensation Withheld Withheld Wages Withheld
Jin Chien $59,000 $19,500 $1,888 (1) $59,000 $4,514
Nina Harris 26,000 9,200 832 (2) 26,000 1,989
(1) $59,000 X 3.2%.

(2) $26,000 X 3.2%.
PROBLEM F-4B
1. Department managers The human resources

have too much authority in department should do
hiring. the hiring.
An interview should not The qualifications of each

be the sole basis for applicant should be
hiring or rejecting an determined and letters of
applicant. recommendation should be
obtained.
The pay rate should not The human resources

be manually written on department should notify
the W-4 form. the payroll department of
new hires through a hiring
authorization form.
2. The chief accountant The treasurer should sign

manually signs the payroll the payroll checks.
checks.
The department managers A representative of the

distribute the payroll treasurer’s department
checks. should distribute the payroll
checks.
The department managers A representative of the

retain custody of treasurer’s department
unclaimed checks. should have custody of
unclaimed checks.
3. The assignment of duties The duties of the payroll

among the payroll clerks clerks should be assigned
does not result in any so that one clerk computes
independent internal gross earnings for all
verification. employees. Then the
computations made should
be verified by the clerk that
did not make the initial
determination of the data.
Each month the duties of
the clerks should be
reversed.
BYP F-1 REAL-WORLD FOCUS
(a) A worker who performs services for you is your employee if you can
control what will be done and how it will be done. This is so even when
you give the employee freedom of action. What matters is that you have
the right to control the details of how the services are performed. Get
Pub. 15-A, Employer’s Supplemental Tax Guide, for more information on
how to determine whether an individual providing services is an
independent contractor or an employee.
Generally, people in business for themselves are not employees. For

example, doctors, lawyers, veterinarians, construction contractors, and
others in an independent trade in which they offer their services to the
public are usually not employees. However, if the business is incor-
porated, corporate officers who work in the business are employees.
(b) Payments for the services of a child under the age of 18 who works for
his or her parent in a trade or business (sole proprietorship or a partnership
in which each partner is a parent of the child) are not subject to social
security and Medicare taxes. If these services are for work other than in a
trade or business, such as domestic work in the parent’s private home,
they are not subject to social security and Medicare taxes until the child
reaches 21.
(c) Any employee without a social security card can get one by completing
Form SS-5, Application for a Social Security Card.
(d) Tips that your employee receives are generally subject to withholding.
Your employee must report cash tips to you by the 10th of the month
after the month the tips are received. The report should include tips you
paid over to the employee for charge customers and tips that the
employee received directly from customers. No report is required for
months when tips are less than $20. Your employee reports the tips on
Form 4070, Employee’s Report of Tips to Employer, or on a similar
statement.
BYP F-1 (Continued)
(e) In general, you must deposit income tax withheld and both the employer
and employee social security and Medicare taxes (minus any advance
EIC payments) by mailing or delivering a check, money order, or cash to
a financial institution that is an authorized depositary for Federal taxes.
However, some taxpayers are required to deposit using the Electronic
Federal Tax Deposit System (EFTPS).
BYP F-2 DECISION-MAKING ACROSS THE ORGANIZATION
(a) OXFORD SERVICES INC.
Number of Days Daily

Month Employees Worked Rate Cost
January-March 2 60 (20 X 3) $96 $11,520
April-May 3 50 (25 X 2) 96 14,400
June-October 2 90 (18 X 5) 96 17,280
November-December 3 46 (23 X 2) 96 13,248
Total Cost $56,448
PERMANENT EMPLOYEES
Salaries ($28,000 X 2)............................................... $56,000
Additional payroll costs
FICA taxes (7.65% X $56,000) .......................... $4,284
Federal unemployment taxes
(.8% X $14,000).............................................. 112
State unemployment taxes
(5.4% X $14,000)............................................ 756
Medical and dental insurance
(2 X $100 X 12) .............................................. 2,400 7,552
$63,552
Longwell Processing Company would save $7,104 ($63,552 – $56,448), as

shown, by discharging the two employees and accepting the Oxford
Services Inc. plan.
(b) Jen should consider the following additional factors:
1. The effect on the morale of the continuing employees if two

employees are terminated.
2. The anticipated efficiency of Oxford Services Inc. workers compared

to the efficiency of the two employees who would be terminated.
BYP F-2 (Continued)
3. The effect on management control and supervision of using Oxford

Services Inc. personnel.
4. The time that may be required to indoctrinate the different Oxford

Services Inc. personnel into the Longwell Processing Company’s
procedures.
BYP F-3 COMMUNICATION ACTIVITY
Dear Mr. Forseth:
In response to your request, I wish to explain the types of taxes that are
involved in determining the payroll and in recording and paying employer
payroll taxes.
The taxes that are involved in determining the payroll are as follows:
1. FICA taxes. These taxes were enacted by Congress to provide workers
with supplemental retirement, employment disability, and medical
benefits. These benefits are financed by a tax levied on employees’
earnings. The tax rate and tax base are set by Congress and both change
intermittently. The current rate is 7.65% on the first $106,800 of gross
earnings. FICA taxes are withheld by the employer and then remitted to
the government. These taxes are not an expense to the employer.
2. Federal income taxes. Employers are required to withhold federal income

taxes from employees each pay period. The amount depends on the
employee’s gross earnings, the number of allowances claimed by the
employee, and the length of the pay period. The amounts withheld are
remitted by the employer to the government. These taxes are not an
expense to the employer.
3. State and city income taxes. Where applicable, these income taxes are
similar to federal income taxes.
There are three types of payroll taxes that are levied on employers that are
recognized as payroll tax expense by the employer.
1. FICA taxes. The employer must match each employee’s FICA contri-
bution. The employer’s tax is subject to the same rate and maximum
earnings applicable to the employee.
2. Federal unemployment taxes. These taxes provide benefits to employees

who lose their jobs through no fault of their own. The tax is 6.2% on the
first $7,000 of gross earnings paid to each employee during a calendar
year. The employer is allowed a maximum credit of 5.4% on the federal
rate for contributions to state unemployment taxes.
BYP F-3 (Continued)
3. State unemployment taxes. These taxes also provide benefits to em-

ployees who lose their jobs. The basic rate is usually 5.4% on the first
$7,000 of wages paid to an employee during the year.
Very truly yours,
BYP F-4 ETHICS CASE
(a) The stakeholders in this situation are:
Jerry Martin, owner and manager.

Sixteen part-time employees of Jerry’s.
Andrea Sun, public accountant.
(b) Not withholding federal and state taxes from employees’ payroll is both
illegal and unethical. Also, not paying FICA taxes, and state and federal
unemployment taxes, is illegal and unethical.
(c) Andrea Sun, as Jerry’s public accountant, should not be an accomplice to

improper payroll deductions and accounting. Andrea should constantly
remind Jerry of the consequences of his illegal payroll payments and the
unrecorded payments. She should advise Jerry that not only is the
government deprived of its proper tax revenues, but employees are
deprived of social security and possibly Medicare credits as well as
workmen’s compensation insurance.
(d) An important internal control principle is to make no payments from cash

receipts. All cash receipts should be deposited daily intact in the bank
and all disbursements should be made by properly authorized and signed
checks.

Appendix F: Payroll Accounting

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APPENDIX F

ASSIGNMENT CLASSIFICATION TABLE

1. Compute and record the 1, 2, 3, 5, 1, 2 1, 2, 3, 4 1A, 2A, 3A 1B, 2B, 3B

2. Describe and record 2, 3, 4, 8 3 3, 5 1A, 2A, 3A 1B, 2B, 3B

3. Discuss the objectives of 9, 10 4 4A 4B

Problem Difficulty Time

F-1A Prepare payroll register and payroll entries. Simple 30–40

F-2A Journalize payroll transactions and adjusting entries. Moderate 30–40

F-4A Identify internal control weaknesses and make Simple 20–30

F-1B Prepare payroll register and payroll entries. Simple 30–40

F-2B Journalize payroll transactions and adjusting entries. Moderate 30–40

F-4B Identify internal control weaknesses and make Simple 20–30

2. Both employees and employers are required to pay FICA taxes.

BRIEF EXERCISE F-1

Gross earnings................................................................ $808.00

BRIEF EXERCISE F-2

Jan. 15 Salaries and Wages Expense ....................... 808.00

Jan. 15 Salaries and Wages Payable ........................ 651.19

BRIEF EXERCISE F-3

Jan. 31 Payroll Tax Expense...................................... 11,634

BRIEF EXERCISE F-4

(a) Timekeeping (c) Preparing the payroll

(a) 1. Regular 40 X $14.00 = $560.00

2. FICA taxes—$49.27 = ($644 X 7.65%).

3. Federal income taxes $55.

4. State income taxes $12.88 = ($644 X 2%).

5. Net pay $498.85 = ($644.00 – $49.27 – $55.00 – $12.88 – $28.00).

(b) Salaries and Wages Expense .................................... 644.00

D. Edwards $4,200 X 7.65% = $321.30 Edwards’s total gross earnings for

M. Ihrke ($1,200 X 6.2%) + ($4,200 X 1.45%) = $135.30. Ihrke’s total

A. Seligman ($2,300 X 6.2%) + ($4,200 X 1.45%) = $203.50. Seligman’s total

P. Paik ($4,200 X 1.45%) = $60.90 Paik’s gross earnings prior to this

(a) See next page.

(b) Jan. 31 Salaries and Wages Expense............... 1,721.00

Weygandt Financial, IFRS, 2/e, Solution’s Manual

(b) Jan. 31 Payroll Tax Expense ................................. 238.35

(a) (1) $1,100 [$10,000 see (2) below – $8,900].

(b) Feb. 28 Salaries and Wages Expense ............. 10,000

28 Salaries and Wages Payable .............. 7,340

(a) FICA tax ($786,000 X 6.2%) + ($850,000 X 1.45%).... $61,057

(b) Payroll Tax Expense .................................................. 66,637

Copyright © 2013 John Wiley & Sons, Inc.

Weygandt Financial, IFRS, 2/e, Solution’s Manual

(b) Feb. 15 Salaries and Wages Expense.............. 2,182.00

15 Payroll Tax Expense ............................ 302.22

(c) Feb. 16 Salaries and Wages Payable............... 1,756.11

(d) Feb. 28 FICA Taxes Payable

(a) Jan. 10 Union Dues Payable....................... 250.00

12 FICA Taxes Payable ....................... 662.20

15 U.S. Savings Bonds Payable......... 350.00

17 State Income Taxes Payable ......... 102.15

20 Federal Unemployment Taxes

31 Salaries and Wages Expense........ 46,200.00

31 Salaries and Wages Payable ......... 38,335.70

(b) Jan. 31 Payroll Tax Expense ............................ 6,398.70

(a) Salaries and Wages Expense ................................. 520,000

(b) Payroll Tax Expense ............................................... 39,070

(c) Federal State

(1) $56,000 X 2.6%.

(a) Weaknesses (b) Recommended Procedures

1. Hours worked are marked Time cards should be

Employees give the The manager should deliver

2. Department manager Rates of pay should be