Principles of Accounts for CSEC®

2nd edition

Answers to Chapter 11: Accounting for the entrepreneur

11.1 Payroll
Question 1
Mala
$85 000
Year 1: Monthly salary is = $7 083.33 per month
12
($85 000 × 105%) $89 250
Year 2: Monthly salary is = = $7 437.50 per month
12 12

Sharon
$64 000
Year 1: Weekly wage is = $1 230.77 per week
52
$64 000 × 105% $67 200
Year 2: Weekly wage is = = $1 292.31 per week
52 52

Question 2
Kris
$112 000
Year 1: Monthly salary is = $9 333.33 per month
12
$112 000 × 104% $116 480
Year 2: Monthly salary is = = $9 706.67 per month
12 12

Rishi
$56 000
Year 1: Weekly wage is = $1 076.92 per week
52
$56 000 × 104% $58 240
Year 2: Weekly wage is = = $1 120 per week
52 52

Question 3
Keith: 40 hours × $32 per hour = $1 280
Leela: 40 hours × $28 per hour + overtime 5 hours × ($28 × 1.25)
= $1 120 + (5 × $35) = $1 120 + $175 = $1 295
Michael: 40 hours × $36 per hour + overtime 6 hours × ($36 × 1.5)
= $1 440 + (6 × $54) = $1 440 + $324 = $1 764

Question 4
Geeta: 35 hours × $26 per hour = $910
Henry: 35 hours × $30 per hour + overtime 6 hours × ($30 × 1.25)
= $1 050 + (6 × $37.50) = $1 050 + $225 = $1 275
Ishaka: 35 hours × $50 per hour + overtime 9 hours × ($50 × 1.5)
= $1 750 + (9 × $75) = $1 750 + $675 = $2 425

1 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
Answers to Chapter 11: Accounting for the entrepreneur

Question 5
a.
Francis:
60 boards @ $3 each = $180
51 sails @ $4 each = $204
53 masts @ $3.50 each = $185.50
Total gross pay: $569.50
Sweeta:
55 boards @ $3 each = $165
47 sails @ $4 each = $188
68 masts @ $3.50 each = $238
Total gross pay: $591
b. With a minimum wage agreement pay would have been: Francis $575, Sweeta $591
Question 6
a.
Robin:
28 product 1 @ $7 each = $196
39 product 2 @ $6 each = $234
28 product 3 @ $8 each = $224
Total gross pay: $654
Stacy:
35 product 1 @ $7 each = $245
31 product 2 @ $6 each = $186
25 product 3 @ $8 each = $200
Total gross pay: $631

b. With a minimum wage agreement pay would have been: Robin $654, Stacy $645
Question 7
Accepted items: 148 + 161 + 157 + 151 + 166 = 783
Gross pay = 783 × $1.20 = $939.60
Question 8
Accepted items: 358 + 395 + 380 + 386 + 365 = 1 884
Gross pay = 1 884 × $0.35 = $659.40
Question 9
Yvonne:
August: $3 400 + [1% × ($44 000 − $40 000)] = $3 400 + (1% × $4 000)
= $3 400 + $40 = $3 440
September: $3 400 + no commission = $3 400
Zamran:
August: $3 400 + no commission = $3 400
September: 3 400 + [1% × ($49 200 − $40 000)] = $3 400 + (1% × $9 200)
= $3 400 + $92 = $3 492
2 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
Answers to Chapter 11: Accounting for the entrepreneur

Question 10
Jamal:
April: $4 800 + [2% × ($33 000 − $30 000)] = $4 800 + (2% × $3 000)
= $4 800 + $60 = $4 860
May: $4 800 + [2% × ($32 000 − $30 000)] = $4 800 + (2% × $2 000)
= $4 800 + $40 = $4 840

Kersha:
April: $5 300 + [2% × ($36 000 − $30 000)] = $5 300 + (2% × $6 000)
= $5 300 + $120 = $5 420
May: $5 300 + no commission = $5 300

Question 11
Day Normal Overtime
hours hours
Monday 8
Tuesday 8 2
Wednesday 8
Thursday 8 3
Friday 8
Saturday 3
Sunday 2

Gross pay is:

Normal hours: 40 × $32 = 1 280
Overtime (weekdays): 5 × ($32 × 1.25) = $200
Overtime (weekends): 5 × ($32 × 1.5) = $240
Total is: $1 720

Question 12
Day Normal Overtime
hours hours
Monday 8 1.5
Tuesday 8
Wednesday 8 4
Thursday 8
Friday 8
Saturday 2.5
Sunday 2

Gross pay is:

Normal hours: 40 × $30 = 1 200
Overtime (weekdays): 5.5 × ($30 × 1.5) = $247.50
Overtime (weekends): 4.5 × ($30 × 1.75) = $236.25
Total is: $1 683.75

3 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
Answers to Chapter 11: Accounting for the entrepreneur

Question 13
Week 6:
Day Accepted
Monday 15
Tuesday 12
Wednesday 14
Thursday 13
Friday 18

Gross pay is: 72 × $11 = $792, so minimum wage is paid $880

Week 7:
Day Accepted
Monday 14
Tuesday 15
Wednesday 19
Thursday 22
Friday 18

Gross pay is: 88 × $11 = $968

Question 14
Week 24:
Day Accepted
Monday 49
Tuesday 55
Wednesday 59
Thursday 51
Friday 57

Gross pay is: 271 × $3 = $813

Week 25:
Day Accepted
Monday 54
Tuesday 48
Wednesday 56
Thursday 56
Friday 50

Gross pay is: 264 × $3 =$792, so minimum wage is paid $800

Question 15
Year 1
$
Gross pay 62 000
Less personal allowance 18 000
Taxable pay 44 000

So income tax will be: 22% × $44 000 = $9 680

And net pay for Year 1 will be: $62 000 – $9 680 = $52 320
4 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
Answers to Chapter 11: Accounting for the entrepreneur

Year 2
$
Gross pay 65 000
Less personal allowance 19 500
Taxable pay 45 500

So income tax will be: 20% × $45 500 = $9 100

And net pay for Year 2 will be: $65 000 – $9 100 = $55 900
Question 16
Year 1
$
Gross pay 47 000
Less personal allowance 12 000
Taxable pay 35 000

So income tax will be: 18% × $35 000 = $6 300

And net pay for Year 1 will be: $47 000 – $6 300 = $40 700

Year 2
$
Gross pay 55 000
Less personal allowance 13 000
Taxable pay 42 000

So income tax will be: 20% × $42 000 = $8 400

And net pay for Year 2 will be: $55 000 – $8 400 = $46 600
Question 17
Taxable pay:
$
Gross pay 90 000
Less personal allowance 16 000
Taxable pay 74 000

Income tax is: 22% × taxable pay $74 000 = $16 280
Net pay:
Renea
$ $
Gross pay 90 000
Deductions
Income tax 16 280
National insurance/social security
(4% × gross pay = 4% × $90 000) 3 600
Pension fund
(5% × gross pay = 5% × $90 000) 4 500
24 380
Net pay 65 620

5 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
Answers to Chapter 11: Accounting for the entrepreneur

Question 18
Taxable pay:
$
Gross pay 74 000
Less personal allowance 18 000
Taxable pay 56 000

Income tax is: 29% × taxable pay $56 000 = $16 240
Net pay:
Shivan
$ $
Gross pay 74 000
Deductions
Income tax 16 240
National insurance/social security
(5% × gross pay, i.e. 5% × $74 000) 3 700
Pension fund
(3% × gross pay, i.e. 3% × $74 000) 2 220
22 160
Net pay 51 840

Question 19
Gross pay:

40 hours × $36 per hour = $1 440

6 hours’ overtime × $45 per hour = $270

Gross pay is $1 710

Income tax:

Income tax is 20% × taxable pay ($1 710 − $650 personal allowance) = 20% × $1 060 = $212

Pay slip: Xavier

$ $
Gross pay 1 710.00
Deductions
Income tax 212.00
National insurance/social security
(3% × gross pay, i.e. 3% × $1 710) 51.30
Health scheme 25.00
Credit union 15.00
303.30
Net pay 1 406.70

6 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
Answers to Chapter 11: Accounting for the entrepreneur

Question 20
Gross pay:

35 hours × $32 per hour = $1 120

7 hours’ overtime × $48 per hour = $336

Gross pay is $1 456

Income tax:

Income tax is 22% × taxable pay ($1 456 – $520 personal allowance) = 22% × $936 = $205.92
Pay slip: Euzhan
$ $
Gross pay 1 456.00
Deductions
Income tax 205.92
National insurance/social security
(4% × gross pay, i.e. 4% × $1 456) 58.24
Trade union 22.00
Sports club 16.00
302.16
Net pay 1 153.84

7 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
 8
Question 21
PAYROLL
WEEK NUMBER
Employee Hourly Normal Overtime Normal Overtime Gross Income National Health Credit Net pay
rate hours Hours pay pay pay tax insurance scheme union
$ $ $ $ $ $ $ $ $
Xavier 36 40 6 1 440 270 1 710 212 51.30 25 15 1406.70

Questions 22
PAYROLL
WEEK NUMBER
Employee Hourly Normal Overtime Normal Overtime Gross Income National Trade Sports Net pay
Answers to Chapter 11: Accounting for the entrepreneur

rate hours Hours pay pay pay tax insurance scheme Club
$ $ $ $ $ $ $ $ $
Euzhan 32 35 7 1 120 336 1 456 205.92 58.24 22 16 1153.84

Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
Answers to Chapter 11: Accounting for the entrepreneur

Question 23
Parkside Trader
Cash flow projection for each of the six months ending 30 September 2019
April May June July August Sept
$ $ $ $ $ $
Cash inflows
Cash sales 5 900 5 500 5 800 5 700 6 000 5 900
Additional capital 1 800
Total inflows 5 900 5 500 5 800 5 700 7 800 5 900
Cash outflows
Payments to credit suppliers 2 800 2 900 3 200 2 900 3 200 3 100
Wages 1 800 1 800 2 000 2 000 1 900 1 800
Rent 700 700 700 900 900 900
General expenses 400 500 400 600 700 500
Total outflows 5 700 5 900 6 300 6 400 6 700 6 300

Net inflow/(outflow) 200 (400) (500) (700) 1 100 (400)

Cash balances
Opening 900 1 100 700 200 (500) 600
Closing 1 100 700 200 (500) 600 200

Question 24

Island Gems
Cash flow projection for each of the six months ending 31 August 2019
April May June July August Sept
$ $ $ $ $ $
Cash inflows
Cash sales 1 100 900 900 1 000 1 200 1 100
Receipts from credit customers 2 500 2 400 2 000 1 900 1 900 2 600
Total inflows 3 600 3 300 2 900 2 900 3 100 3 700
Cash outflows
Payments to credit suppliers 1 200 1 400 1 100 1 000 1 300 1 300
Wages 900 900 900 1 100 1 100 1 100
Drawings 500 500 500 800 700 500
Utilities 300 200 600 400 600 300
Total outflows 2 900 3 000 3 100 3 300 3 700 3 200

Net inflow/(outflow) 700 300 (200) (400) (600) 500

Cash balances
Opening 100 800 1 100 900 500 (100)
Closing 800 1 100 900 500 (100) 400

9 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
 Answers to Chapter 11: Accounting for the entrepreneur

Question 25

Sales budget for Galaxy Products for the three months

ending 30 November 2019
September October November
Sales units 180 200 240
Sales value $6 300 $7 000 $8 880

Question 26

Sales budget for Carl for the three months

ending 30 June 2019
April May June
Sales units 5 060 5 720 5 830
Sales value $40 480 $45 760 $46 640

Question 27

Production budget for Nyla for the three months

ending 31 July 2019
May June July
Units Units Units
Sales units 1 500 1 600 1 800
Opening inventory (300) (320) (360)
Closing inventory 320 360 380
Production 1 520 1 640 1 820

Question 28

Production budget for Ashani for the three quarters

ending 30 September 2019
Quarter 1 Quarter 2 Quarter 3
Units Units Units
Sales units 8 200 7 500 9 300
Opening inventory (410) (375) (465)
Closing inventory 375 465 440
Production 8 165 7 590 9 275

Develop your exam skills

Paper 1
1. D   2. B   3. B   4. A   5. D

10 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
 Answers to Chapter 11: Accounting for the entrepreneur

Paper 2
Case study 1: Payroll
a. Monthly income
Selena – gross income $7 200 Tax
$
First $3 000 0
Next $3 001 to $6 000, i.e. $3 000 × 15% 450
Above $6 001, i.e. $1 200 × 25% 300
Total tax per month 750
Monthly income after tax, i.e. $7 200 − $750 6 450

Linford – gross income $3 800 Tax

$
First $3 000 0
Next $3 001 to $6 000, i.e. $800 × 15% 120
Total tax per month 120
Monthly income after tax, i.e. $3 800 − $120 3 680

b. Monthly net pay

Selena Tax
$
Monthly income after tax, i.e. $7 200 − $750 6 450
Less compulsory deductions
National insurance: 6% × $7 200 432
Pension contribution: 2% × $6 450 129
Net pay after deductions 5 889

Linford Tax
$
Monthly income after tax, i.e. $3 800 − $120 3 680.00
Less compulsory deductions
National insurance: 6% × $3 800 228.00
Pension contribution: 2% × $3 680 73.60
Net pay after deductions 3 378.40

c. Other voluntary deductions – two from:

Charity donation; trade union membership fee; health scheme contribution; life insurance
contribution; credit union contribution; saving scheme contribution; sports club membership
fee, etc.
d. Benefits could include (two from): speed of processing; accuracy of output; automatic
production of payslips; automatic calculation of non-routine details such as bonuses;
application of current tax regulations; calculation of staff costs to aid planning and budgeting.
e. Cost of payroll software; lack of skilled staff able to use software.

11 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019
 Answers to Chapter 11: Accounting for the entrepreneur

Case Study 2: Forward planning

a. Business plan should include (three from): executive summary, company background,
marketing plan/analysis, financial plan.
b. Sales budget:
Sales budget for Montego Enterprises for the three months
ending 31 May 2019
March April May
Sales units 240 310 360
Sales value $8 160 $10 540 $12 240

c. Cash flow forecast:

Montego Enterprises
Cash flow projection for each of the three months ending
31 May 2019
March April May
$ $ $
Cash inflows
Cash sales 8 160 10 540 12 240
Capital introduced 24 000
Total inflows 32 160 10 540 12 240
Cash outflows
Purchase of non-current assets 17 300
Payments to credit suppliers 7 500 7 800 8 100
Wages 1 560 1 800 1 800
Rent 840 840 840
General expenses 350 350 350
Total outflows 27 550 10 790 11 090

Net inflow/(outflow) (4 610) (250) 1 150

Cash balances
Opening 0 4 610 4 360
Closing 4 610 4 360 5 510

12 Principles of Accounts for CSEC®, 2nd edition © Oxford University Press 2019