PAMANTASAN NG CABUYAO

COST ACCOUNTING & CONTROL

LESSON 4: ACCOUNTINF FOR LABOR

LESSON OBJECTIVES:

At the end of this lesson, you will be able to:

1. Know the classification of labor costs.

2. Prepare journal entries of labor costs.
3. Know the different departments responsible for labor costs.
4. Know the different methods of time keeping.
5. S. Differentiate the types of wage plans.
6. Know the advantages and disadvantages of different wage plans.
7. Know the accounting for overtime premium.
8. Enumerate the different employer's labor contributions.

DISCUSSION

Labor cost is one of the primary costs of production system. It consists of workers' payroll who are needed to process and
convert raw materials into finished goods. It is classified into (1) direct and (2) indirect labor cost. Direct labor is a payroll
costs that are paid to workers who are directly engaged in the conversion process of raw materials to finished goods (i.e.
wages of laborers who are actually involved in the conversion process). It is charged to Work in. Process account. Indirect
labor is any payroll costs that are paid to a worker that supports the production process and which are not directly involved
in the conversion of raw materials into finished products (i.e. salaries and wages of supervisors, storekeeper, maintenance
labor, factory janitors, factory security guards etc.).

It is charged to Factory Overhead Control account. Labor costs are not only the payroll or wages paid to workers, it also
includes the financial benefits (fringe benefits) given to workers to motivate them. Examples of fringe benefits are subsidized
food, housing, education, medical benefits etc.

The primary objective of management is to efficiently utilize its human resources as economically as possible. Therefore,
proper analysis and control of labor costs is needed for proper used of its human resources because of the following
reasons:

1. It has a significant effect on the growth, profitability of the company.

2. Labor productivity significantly influences the conversion cost per unit.
3. It is one major cost elements in the manufacturing operation.
4. It is more difficult to control compared to material cost because of human involvement.
5. It is affected by government policy and trade union.
6. It is not subject to any technical limitations which restrict productivity.
7. It is affected by inefficiency on the growth, ineffective supervision, idle time, high rate of labor turnover,
attitude of workers towards work, dissatisfaction of workers.

Labor cost accounting and control requires the following:

1. Correct timekeeping
2. Strict control on labor engagement
3. Analysis of time in terms of departments, operation and production orders.
4. Improvement in the method of production

DEPARTMENTS RESPONSIBLE FOR LABOR COST CONTROL

1. Personnel Department
2. Engineering and Works Study Department
3. Time Keeping Departments
4. Payroll Department
5. Cost Accounting Department

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

 PERSONNEL DEPARTMENT
This department is responsible for the planning, recruitment, and firing of the labor force. It is the one who provides
trainings and seminars and place people to the job for which they are suited. It is also responsible for carrying out the
labor policies laid down by the top management.

ENGINEERING AND WORK STUDY DEPARTMENT

This department is responsible for maintaining control over working conditions and production technique/plan and
specification for each job, process, and operations. It includes preparation of plan for each job and process, maintaining
efficient working condition, conducting time and motion study, merit rating, setting time wage system, and conducting
research work.
TIMEKEEPING DEPARTMENT
This department is responsible for the accumulation of the total hours worked spent by each worker on a job, product, and
processes. This department has two important activities: (1) timekeeping and (2) time booking.

Timekeeping involves recording the total number hours each worker spent in carrying out the job. It is important in
determining the attendance and determination of payroll payment to each worker. This includes preparation of payroll,
effective utilization of human resources, minimizing labor costs, discipline in attendance and determining the ideal labor
time and machine time.

The following are methods of time keeping:

1. Manual Method:
a. Attendance Register Method - in this method a log book or time register book is maintained by the timekeeper.
This register or logbook is filled in by the timekeeper when the workers get inside the factory and the time when
the workers depart from the factory. Workers are required to sign in when they get inside and sign out when they
depart from the factory.

b. Token or Disc Method - in this method a token or a disc is given to each worker bearing his/her identification
number. The discs or token are placed on hooks on a board at the entrance of the factory gate. When the worker
enters the factory gate, he/she removes the disc or token and drops it into a box. A late worker will drop his/her
token or disc in a separate box while the absent workers token or disc are not removed from the board. The
timekeeper records the attendance on the basis of these discs.

2. Mechanical Method
a. Time Recording Clocks - under this method, each worker is given a time card. These time cards are arranged
alphabetically and with a serial number in a tray at the gate entrance of the factory. When the worker enters in
from the factory, he or she will insert the time card to the time clock installed in the factory gate. The workers
also insert the time card as he/she departs from the factory to take his/her lunch, return from lunch and leave
the factory after his/her day's work.

b. Dial Time Records - under this method, a machine is used known as dial time recorder to register automatically
the time in and out of the workers. This machine recorder has a number of holes which represents each worker's
identification number. When the worker enters and departs from the factory, the worker will press the radial arm
after placing it in the hole of his number and his time will automatically register on an attendance sheet placed
inside the machine.

c. Key Recorder System - under this method, each worker is given a key which represents worker's identification
number. The worker will insert his/her key in the keyhole, then the time ticket and clock time are recorded on a
sheet of paper

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

Time booking refers to the analysis of time of each worker in terms of department, operation, process or jobs. It is
essential in determining the cost of each job, operation or process; proper utilization of workers' time; assigning the
overhead cost to units; and effective cost control and cost reduction.

PAYROLL DEPARTMENT
This department is responsible for the computation of the total gross earnings, including the amount of the payroll
deduction (withholding taxes, SSS, Philhealth, Pag-ibig contribution) of each worker, preparation of payroll/wages of all
workers and maintaining the payroll records.

COST ACCOUTING DEPARTMENT

This department is responsible in collecting, classifying and assigning all costs to jobs, products and processes.

TYPES OF WAGE PAYMENT PLANS

1. Time Based Wage Plan - under this plan, wages are determined on the basis of time worked spent by workers
irrespective of the quality of work done. It is calculated by multiplying the hourly rate of the worker by the number
of time spent.

Formula: Wage - Number of Time Worked x Rate per hour

2. Piece Based Wage Plan - under this plan, wages are determined on the basis of output produced by the workers
without considering the time spent in performing the job. It is calculated by multiplying the number of units produced
by a specified rate per unit.

Formula: Wage = Units Produced x Rate per unit

3. Modified Based Wage Plan - this is a combination of time wage plan and piece wage plan. Under this plan, each
worker is paid based on a minimum hourly rate regardless if an established quota of production is not met. However,
workers are given a bonus for the additional piece of output if they exceeded the established quota.

4. Bonus or Incentive Schemes - this wage payment is also known as premium bonus plan. It is given in order to
increase production. It has two types:

a. Individual Incentive Plan - under this scheme, remuneration will be based on the performance of
individual workers.
b. Group Incentive Plan - under this scheme, remuneration is based on the productivity of the group or
entire work force of the organization.

PAYROLL ACCOUNTING SYSTEM FOR MANUFACTURING COMPANIES

1. Record the hours worked or units produced by each employee in total and by job, operation and process.
2. Analyze the hours worked by workers to determine how labor time is charged.
3. Charge payroll time to jobs, operation, processes and factory overhead.
4. Prepare the payroll

The time tickets (time wage plan) and production reports (Piece wage plan) are gathered and are sent to the payroll
department on a daily basis. The gross earnings are then computed and the applicable deductions such as withholding
taxes and employee's contribution are deducted to compute the net amount of wages. The accountant then analyzes,
summarizes and classifies the labor costs to appropriate job, processes and factory overhead. The analysis is recorded on
a labor cost summary in the job cost ledger (General Ledger), and in the factory overhead. The Labor Cost Summary
summarizes the direct labor and indirect labor costs to a job, process and department for the period. The accountant records

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

the labor cost to work in process accounts (direct labor) and factory overhead control account (indirect labor). The journal
entry to record the labor costs will be:

Work in Process XXX

Factory Overhead Control XXX

Payroll XXX

In preparing the entries, it is also important to separate the regular time and over-time of each worker because of the
accounting treatment of regular time and overtime pay for workers. The regular time pay is charged to Work in Process
account and they are computed based on the regular rate multiplied by the total number of regular hours worked, while
overtime pay may be charged to work in process account or factory overhead account depending upon the
conditions while over-time hours are incurred and it is computed by multiplying the overtime pay rate (determined in the
labor code) by the total number of overtime hours,

Illustration: Assume an employee regularly earns P100 per hour for an 8-hour on ordinary working days. If the worker is
called to work more than 8 hours in a working day, an additional pay premium computed as regular rate plus 50% in excess
of 8 hours. Also assume the employee works 10 hours in a working day. The employee's earnings for that day is computed
as:

Earnings at regular rate (8 hours x P100) 800.00

Overtime (2 hours x P100) 200.00

Overtime premium (2 hours x P50) 100.00

Total Earnings 1,100.00

The overtime premium is computed based on P100 regular rate per hour multiplied by 50%.

Accounting for Overtime Premium

1. Charged to Specific Job - if the workers are called to work for rush orders upon specific request of a customer
with the knowledge that overtime is required to finish the job, the overtime premium is charged to Work in Process
account. The entry would be:

Work in Process 1,100

Payroll 1,100

2. Charged to Manufacturing Overhead Control - if the job is a regular order which cannot be completed in the
regular working hours the overtime premium is charged to Factory Overhead Control account. The entry would be:

Work in Process 1,000

Factory Overhead Control 100

Payroll 1,100

Note: The P200 is debited to Work in Process account because the basic rate for overtime is part of the direct labor cost
while the P100 overtime premium is generally part of indirect labor cost unless the overtime is worked at the specific request
of a customer.

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

EMPLOYER'S CONTRIBUTIONS
Employers have a corresponding share to SSS, Philhealth/Medicare and Pagibig contribution for each factory worker.
These contributions are charged to Factory Overhead Control account, while employer contributions relating to other
employees (Administrative and Sales function) are charged to expense. Every employer is required to contribute and file
the contributions mentioned above to appropriate government agencies or they will be penalized.

1. SSS Contribution - the Social Security System (SSS) requires all employers to pay social security taxes
/contribution and to deduct from gross earnings of employee his/her contribution.

2. Philhealth/Medicare Contribution - the amount deducted by the employer is equal to the amount deducted to
the employee's gross earnings. For example, if a worker earns P8,999.99 and below, the employee share is
P100 which is equal to employer share.

3. PAG-IBIG Contribution - the amount deducted by the employer to the gross earnings of the employee is equal
to 2% of his basic compensation or P100 whichever is lower, while the share of the employer will be the same
amount deducted from the employee. For example, if an employee earns P10,000 a month, his/her
contribution will be P200 (2% x P10,000) or P100, whichever is lower. Therefore, he/she will pay P100, it
means that even if the contribution computed based on 2% amount exceeds P100, the contribution will remain
P100.

GROSS EARNING DEDUCTIONS

Gross earning means the total compensation of employee which includes the regular pay and other benefits. It has two
types: (1) Wages and (2) Salary. Wages are earnings of an employee who are paid per production output or on an hourly
worked. On the other hand, salaries are earnings paid to an employee who received a fixed amount per month or semi-
monthly regardless of the hours worked in a period.

1 Withholding Taxes

Every employer is required by law to deduct a certain amount of tax to the gross earnings of each employee and it
will be remitted to the Bureau of Internal Revenue (131.R). The amount of withholding tax is based on the taxable
income computed using the tax table provided by SIR. The tax table for monthly withholding tax on compensation is
provided as follows:

Monthly 1 2 3 4 5 6

20,833 P20,833 P33,333 P166,667

Compensation and - - P66,667 - - P666,667
Range below P33,332 P66,666 P166,666 P666,666 and above
0.00 + 2,500 + 40,833.33
Prescribed 20% 25% P10,833.33 + 32% 200,833.33
Withholding over over + 30% over over +35% over
Tax 0.00 P20,833 33,333 66,667 166,667 666,667

2. PAG-IBIG Contribution

It is the amount deducted from the employee's salary to be remitted to the Home Development Mutual Fund. The
Pag-IBIG contribution table for employees and employers are provided as follows:

Employee's Employer's
Monthly Salary Contribution Rate Contribution Rate Total
At least P1,000 - P1,500 1% 2% 3%
Over P1,500 2% 2% 4%

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

3. Social Security System Premiums

Every employee is required by law to pay his/her contribution to the Social Security System (SSS). The amount
deducted from the salary for his/her Protection in cases of disability, sickness, retirement and death

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

 4. Philhealth/Medicare Contribution

It is the amount deducted from the employee's salary as health insurance. The employed members of Philhealth need to
pay a monthly contribution equivalent to 2.75% of their monthly basic salary which is shared by both the employee and
employer. The Philhealth Contribution table 2020 for employed members and formal economy is presented below.

Illustration 1: On January 30, 2020, Marites Corporation has the following employees:

Employees Classification Monthly Gross Earnings

Paul Office Manager 40,000
Ivan Factory worker 17,000
Josh Factory supervisor 25,000
John Sales manager 22,000
Zoe Factory worker 18,000

Required: Prepare the following

a. The SSS, Philhealth, Pag-IBIG and Withholding Tax Computation

b. The journal entries to record the payroll

The SSS Computation Schedule

Use the salary bracket P19,750 and above for Paul, Josh and John; use the salary bracket P16,750 - 17,249.99 for Ivan
and salary bracket P17,750 -18,249.99 for Zoe.

Employees Employer Share Employee Share Total

Paul 1,600 800 2,400
Ivan 1,360 680 2,040
Josh 1,600 800 2,400
John 1,600 800 2,400
Zoe 1,440 720 2,160
Total 7,600 3,800 11,400

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

The Philhealth Computation Schedule:

The monthly basic salary is multiplied by 2.75% to get the monthly premium. The total monthly premium is shared equally
by the employer and the employee.

Monthly Gross Employer Employee

Employees Earnings Monthly Premium Share Share
Paul 40,000 1,100 550 550
Ivan 17,000 468 233.75 233.75
Josh 25,000 688 343.75 343.75
John 22,000 605 302.50 302.50
Zoe 18,000 495 247.50 247.50
Total 122,000 3,355 1,677.50 1,677.50

The Pag-IBIG Computation Schedule:

Use the salary bracket Over P1,500 for all the employees. The employer's and employees will be subjected to 2%
contribution rate.

Employer Employee
Employees Monthly Gross Earnings Share Share
Paul 40,000 800 800
Ivan 17,000 340 340
Josh 25,000 500 500
John 22,000 440 440
Zoe 18,000 360 360
Total 122,000 2,440 2,440

The Withholding Tax Computation:

The computation of the monthly withholding tax will be based on the monthly taxable income which is computed based on
monthly earnings of the employee less the contribution of SSS, Philhealth and Pag-ibig.

Computation of Taxable Income

Paul Ivan
Gross Earnings 40,000 Gross Earnings 17,000
Less: SSS Contribution 800 Less: SSS Contribution 680
Pag-IBIG Contribution 800 Pag-IBIG Contribution. 340
Philhealth Contribution 550 Philhealth Contribution 233.75
Taxable Income 37,850 Taxable Income 15,746.25

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

Josh John

Gross Earnings 25,000 Gross Earnings 22,000

Less: SSS Contribution 800 Less: SSS Contribution 800
Pag-IBIG Contribution 500 Pag-IBIG Contribution 440
Philhealth Contribution 343.75 Philhealth Contribution 302.50
Taxable Income 23,356.25 Taxable Income 20,457.50

Zoe
Gross Earnings 18,000
Less: SSS Contribution 720
Pag-IBIG Contribution 360
Philhealth Contribution 247.50
Taxable Income 16,672.50

Computation of Withholding Tax

1. Paul (column 3)
2,500.00
First 33,333 1,129.25
3,629.25
Excess (37,850 - 33,333) x 25%

Total
---
2. Ivan (column 1)

3. Josh (column 2)

First 20,833 ---

Excess (23,356.25 - 20,833) x 20% 504.65
Total 504.60

4. John (column 1) ---

---
5. Zoe (column 1)

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

The payroll sheet of Mar ites Cor por ation

MARIE CORPORATION
PAYROLL SHEET
FOR THE MONTH OF JANUARY 2020

Monthly
Gross Total
Na me s E ar nin gs WTAX SSS Philhealth HDMF Deduction Net Pay
Paul 40 , 00 0 3, 6 29 .2 5 800 550 800 5,779.25 34,220.75
Ivan 17,000 680 23 3 .7 5 340 1,254.00 15,747.00
Josh 25,000 504.60 800 34 3 .7 5 500 2,148.35 22 , 85 1. 6 5
,
John 22,000 - 800 30 2 .5 0 440 1,542.50 20 , 45 7. 5 0
Zoe 18,000 - 720 24 7 .5 0 360 1,327.50 16,672.50
Total 122,000 4,133.85 3,800 1,676.75 2,440 12,052.60 109,949.40

1. To record payroll and employee contribution

Payroll 122,000
WTAX Payable 4,133.85
S S S Pr e m iu m P ay ab l e 3,800.00
P hi l h ea l th Pr em i u m P a y ab l e 1,676.75
PAG-IBIG Premium Payable 2,440.00
Accrued Payroll 10 9 ,9 4 9. 40
To record payroll for the month of August

2. To record the dist ribution of payroll

Work in Proc ess

Fac t ory O v er h e ad C o n tr o l 25,000
35,000
A dm i n is tr at iv e Ex p en s es 40,000
Selling Expens es 22,000
Payroll 122,000
To record the labor distribution

3. To r e co rd t h e emp l oy er 's c ont rib uti ons

Fac tory O verhead Contr ol 6,425.00

Adminis tr ative 2,950.00
Selling Expens es 2,342.50
S S S Co n tr ib ut i o n P ay ab l e 7,600.00
P hi l h ea l th C o ntr i b ut i o n P ay a b l e 1,677.50
PAG-IBIG Contribution Payable 2,440.00
To record employer's contributions

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

I l l u s t r a t io n: M a r i f e Co r p o r a t i o n h a s t h e f o l l o w i n g p a y r o l l s u m m a r y f o r t h e m o n t h of August:

Factory Workers Administrative & Sales Employees Total

Gross Earnings 1,000,000 600,000 1,600,000
Less: Deductions
Withholding tax 320,000 192,000 512,000
SSS Contribution 25,000 15,000 40,000
Philhealth Contribution 10,000 6,000 16,000
Pag-ibig Contribution 500 500 1,000
Total 355,500 213,500 569,000

T h e f o l l o w i n g i s t h e j o u r n a l e n t r i e s t o b e r ec o r d e d b y t h e c o m p a n y :

1. To record payroll and employee's contribution

Payroll 1,600,000

WTAX Payable 512,000

SSS Premium Payable 40,000

Philhealth Premium Payable 16,000

PAG-IBIG Premium Payable 1,000

Accrued Payroll 569,000

To record payroll for the month of August

2 . T o r e c o r d t h e d i s t r i b u t i o n o f p a y r o l l Assume that 10% of the factory employee's salary is

considered indirect labor.
Work in Process (90%) 900,000

Factory Overhead Control (10%) 10 0 ,0 0 0

Adminis trative and Selling Expens es 600,000

Payroll 1,600,000
To record the labor distribution

3. T o r e c or d e m p l oy er 's c o n tr i b u t i o ns

Assume that the payroll deductions, such as SSS, Philhealth and PAG -IBIG contribution
of the employee is the same as the contribution share of the employer. The journal entry
would be:

Factory Overhead Control 35,500

Adminis trative and Selling Expens es 21,500

SSS Contribution Payable 40,000

Philhealth Contr ibution Pay able 16,000

PAG-IBIG Contribution Payable 1,000

To record employer's contributions

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX
 LABOR TIME LOSSES

A. IDLE TIME
It is the time was ted in whic h the work ers s pend their time without giv ing any p r o d u c t i o n c a u s e d b y
non- av ailabi lity of m aterials , ineffic ient s uperv is ion, machine breakdown, power interruption
e t c . . I t h a s t w o t y p e s : ( 1 ) n o r m a l i d l e time and (2) abnormal idle time.

Normal Idle time refers to a loss of time, which is inherent in production or c a n n o t b e a v o i d e d .

I t i s c a u s e d b y t h e t i m e t a k e n f o r l u n c h o r " m e r i e n d a " break, time for changing from one jo b
to another, time spent in getting tools, m at er ia l , par ts an d i ns tr uc t io ns e tc .. Ab n o r m a l I d le t i m e
refers to a loss of t i m e d u e t o a b n o r m a l r e a s o n s s u c h a s p o w e r f a i l u r e ; a v o i d a b l e m a c h i n e
b r e a k d o w n , t i m e l o s s d u e t o i n e f f i c i e n c y o f w o r k e r s ; t i m e l o s s d u e t o s t r i k e s , layoff, etc....

Normal idle time is accounted as part of the production cost. The cost of idle t i m e t h a t r e l a t e s
t o d i r e c t l a b o r s h a l l o r a r t o t h e d i r e c t l a b o r c o s t o production. The cost of normal idle time
that does not relate to direct labor cost shall be accounted as part of the factory overhead costs.
However, abnormal idle t i m e i s t r e a t e d a s l o s s o r e x p e n s e .

B . M A C H I N E S E T - U P T I M E I t i s t h e t i m e f o r n o n - p r o d u c t i v e h o u rs p a i d t o w o r k er s w h i le t h e
m a c h i n e s a r e being prepar ed for new jobs .

C . LABO R CO ST O F R E WO RK ING D E FE CT I V E UN IT S
I t i s a n a d d i t i o n a l l a b o r c o s t p a i d t o w o r k e r s t o c o r r e c t d e f e c t i v e u n i t o f pr o duc ts w h ic h
fa i l t o pas s t h e q ua l ity c o ntr o l i ns pec t io n .

OTHER LABOR RELATED COSTS CHARGED TO FACTORY OVERHEAD

1. Overtime Premium
2. SSS, Philhealth and PAG-IBIG contribution of employer
3 . F r i n g e B e n e f i t s s u c h a s s i c k l e a v e w i t h pa y , h o l i d a y , v ac a t i o n p a y , h e a l t h i n s u r a n c e , p e n s i o n
p a y m e n t s , h o s p i t a l i z a ti o n , b e n e f i t s e t c .
4. Shift Premium Pay - cost of labor paid to workers who work on an evening shift. Also known as Night Differential
Pay.
5. Incentive Plans

Illustration: Mr. James, a factory laborer earns P20,000 per month, and the
company pays one month salary as a bonus at the end of the year. Mr. James
i s e n t i t l e d t o a h a l f m o n t h p a i d v a c a t i o n l e a v e . T h e c o m p a n y a l s o p a y s P 2 , 0 0 0 a year into a pension
fund of the worker. All fringe benefits of factory laborer are c h a r g e d t o t h e f a c t o r y o v e r h e a d c o n t r o l
a c c o u n t . T h e f r i n g e b e n e f i t s a r e char ged to production during the 11 1 /2 months the employee is at
work.

Compute the total fringe benefit liability

Bonus (20,000 / 11.5 mos.) 1,739

Vacation leave incentive ((20,000 x 1/2) / 11.5 mos.) 870

Pension (2,000 / 12 mos.) 167

Total fringe benefits liability 2,776

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

Journal Entry:
1. To record labor cost

Payroll 20,000

Accrued Payroll 20,000

2. To record labor distribution

Work in Process 20,000

Payroll 20 , 00 0

3. To record fringe benefits liability

Factory Overhead Control 2, 7 76

Estimated Liability for bonus 1,739

Estimated Liability for vacation 870

Estimated Liability for pension 167

- END –

You are blessed!

Sir P

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

 DO-IT-YOURSELF

COST ACCOUNTING & CONTROL

ACCOUNTING FOR LABOR

Problem 1: Gross Pay and Net Pay

CPA Corp. pays its employee at a rate of P50/hour. The tax and other deductions amount
t o 2 0 % o f m o n t h l y i n c o m e i n e x c e s s o f P 1 , 0 0 0 . I f a n employ ee work s 40 hours in a 120 hours
in a month

Required: Compute the following:

a. Gross Pay
b. Net pay

P r o b l e m 2 : O n J a n u a r y 3 0 , 2 0 2 0 , A T O M C o r p o r a t i o n h a s t h e f o l l o w i n g employees:
Employees Classification Monthly Gross Earnings
Mark Office Manager 35,000
Joan Factory worker 15,000
Irene Factory supervisor 20,000
Earl Sales manager 25,000
Marie Factory worker 16,000

Required: Prepare the following

a. The SSS, Philhealth, Pag-IBIG and Withholding Tax Computation

b. The journal entries to record the payroll.

Problem 3: O vertime Premium

Mr . Irv in, a fac tory work er is paid P150 per hour for a regular work of 40 hours. D u r i n g t h e w e e k ,
M r . I r v i n w o r k e d 4 5 h o u r s a n d e a r n e d t i m e a n d a h a l f f o r ov ertime hours .

Required: Prepare journal entries, assuming

1 . I f o v e r t i m e p r e m i u m i s c h a r g e d t o t h e j o b s w o r k e d d u r i n g t h e o v e r t i m e hours .
2 . If the overtime premium is not charged to specific jobs.

Problem 4: Payroll Computation

G TA Corp. has the following data for the fourth week of Augus t:
Hours Worked
Employee
Name Hourly
Rate Sun Mon Tues Wed Thurs Fri Sat Total

Br i an 900 6 8 8 8 8 8 8 54
Chris 950 8 7 10 9 7 8 49
Regie 750 1 8 9 8 10 9 8 53
Tom 900 5 8 10 8 8 9 8 56
Jack 1,000 9 8 8 6 7 10 8 56

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX

 The ra te f or ho urs i n ex c es s of 4 0 is o ne a nd h a lf t im es th e r eg ul ar r at e. T he rate for hours
worked on Sunday is twice the regular rate.

Req ui r ed: C om p ut e t h e gr os s E ar n i n gs of ea c h e mp l oy ee

Problem 5: Journal Ent ries

Riv er a Corp has the following data fo r the month of O ctober 2030:

Gross Payroll 1,000,000

Employee's Deductions:
SSS Contribution 20,000
Philhealth Contribution 10,000
Pa-ibig Contribution 10,000
Withholding taxes 100,000

The employer taxes are as follows:

SSS Contribution 40,000

Philhealth Contribution 10,000
Pag-ibig Contribution 10,000

The company distributes its total payroll as follows: 50% to direct labor, 20% to indirect labor, 25% to
administrative and 5% to Sales salary. The company also apportions employer's contribution as follows:
70% to factory overhead 25% to administr ative and 5% to s elling expens es.

Required: Prepar e the j ournal entr ies for :

a. Labor Incurrence c. To record employers' contributions

b. Labor Distribution d. Payment of Accrued Payroll

Problem 6: Journal Ent ries

T h e f o l l o w i n g a r e d a t a a v a i l a b l e f o r t h e m o n t h o f N o v e m b e r o f S t a . T e r e s i t a Corp.

G ros s E ar n in gs 8, 5 00 ,0 0 0
S S S Co n tr ib ut i o n 425,000
Philhealth Contr ibution 85 , 00 0
Pag-ibig Contribution 85 , 00 0
Withholding Taxes 2,125,000

Required: Prepar e the j ournal entr ies for :

a. Labor Incurrence
b. Labor Distribution
c. Payment of accrued payroll

- END -

Prepared by: Ronnelson Pascual, CPA,MBA, CTT, MRITAX