240 Payroll Accounting Chapter 7. Comprehensive Projects-Paper-Based versions One-Month Project NOTE! Templates needed to complete these exercises, including one containing year-to-date payroll data, are included in the Student Exercise Files download for this course. Ellipses Corp. is a small business that operates in Herndon, VA. The company is located at 10 Period Lane, Herndon, VA 20170. Its federal Employer Identification Number is 77-7777777, and its president, who signs all tax forms, is John Parker (telephone #571-555-0073). The company does not wish to name a third-party designee on forms. During 2020 four individuals are employed by Ellipses Corp. These employees are as follows: Social Security 111-11-1111 Federal W/H State W/H Marital Allowances Allowances Status 2 2 Married 777-77-7777 4 3 Married Name Address Hunter Cranston 85 Southern Road Herndon, VA 20170 Allison Harrison 203A Pine Court Herndon, VA 20170 John Parker 212 Tradition Lane Herndon, VA 20170 Pierre Sternberg 41 Seward Boulevard Herndon, VA 20170 444-44-4444 1 1 Single 333-33-3333 N/A N/A Married Note that Pierre Sternberg was hired in November, and his first day of work was Monday, November 23. On his W-4 Form Pierre checked box 2c and left sections 3 and 4 blank. Pierre files as married filing jointly on his tax return. Additionally, due to an economic downturn, Allison Harrison was laid off in mid-December, with her last day of work on Friday, December 11. All employees of Ellipses Corp. work a regular 40-hour workweek (thus all hours worked over 40 in a given week are overtime hours), receive overtime pay at a rate of 1.5 times the regular wage rate, and are paid weekly on Friday for the current week (which runs from Saturday through Friday, although employees never work on weekends). The SUTA tax rate applicable to Ellipses Corp. is 3.1%, while the SUTA wage base in Virginia is $8,000. Earnings and voluntary deduction information for each of the four employees is as follows: Regular Wage Rate Name Hunter Cranston Allison Harrison John Parker Pierre Sternberg $15/hour Weekly Charitable Contribution $5 $5 Annual Weekly 401(k) Salary Deduction N/A 6% of gross pay N/A 5% of gross pay $203,000.20 NA $112,000 20 1% of gross pay $23/hour N/A $20 N/A N/A One-Month Project 241 The first 11 months of the year have passed, and all payroll-related activity has been properly accounted for as of 11/30/2020. Payroll data for each of the four employees for the first three quarters of the year, as well as for the months of October and November, is as follows: Hunter Cranston Gross Federal State Social Medicare 401(k) Charitable Period Earnings Income Tax Income Tax Security Tax Tax Deduction Cont. 1st quarter 57,800 $221 $366.60 5483.60 $113.10 $468 $65 2nd quarter $7,800 $221 $366.60 $483.60 $113.10 $468 $65 3rd quarter $7,800 $221 $366.60 $483.60 $113.10 $468 $65 October $3,000 $85 $141 $186 $43.50 $180 $25 November $2,400 $68 $112.80 $148.80 $34.80 $144 $20 Allison Harrison Gross Federal State Social Medicare 401(k) Charitable Period Earnings Income Tax Income Tax Security Tax Tax Deduction Cont 1st quarter 511,960 5403 $568.10 5741.52 5173.42 $598 $65 2nd quarter $11,960 $403 $568.10 $741.52 $173.42 $598 $65 3rd quarter 511,960 5403 $568.10 5741.52 5173.42 5598 $65 October $4,600 $155 $218.50 $285.20 S66.70 $230 $25 November 53,680 $124 $174.80 $228.16 $53.36 $184 $20 John Parker Gross Federal State Social Medicare 401(k) Charitable Period Earnings Income Tax Income Tax Security Tax Tax Deduction Cont. 1st quarter $50,750.05 510,844.73 $2,537.47 $3,146.52 $735.93 SO $260 2nd quarter $50,750.05 510,844.73 $2,537.47 $3,146.52 $735.93 SO $260 3rd quarter $50,750.05 $10,844.73 $2,537.47 $2,244.36 $735.93 SO $260 October $19,519.25 $4,171.05 $975.95 SO $283.05 $100 November $15,615.40 $3,336.84 $780.76 SO $226.44 SO $80 8 242 Payroll Accounting Chapter 7: Comprehensive Projects-Paper-Based versions Pierre Sternberg Gross Federal State Social Medicare 401(k) Charitable Period Earnings Income Tax Income Tax Security Tax Tax Deduction Cont 1st quarters 50 2nd quarter so $0 50 SO SO 3rd quarter SO SO SO October November 52, 153.85 $31.23 $21.54 $0 SO SO SO so 8 8 co SO $0 $0 $0 SO 50 $0 $0 SO $0 SO SO $340.73 $106.62 $133.54 SO Note that all tax payments and filings are made on the due date. Based on the data provided here, you will complete the following: 1. Establish an employee earnings record for each of the company's four employees. Complete the top portion of each record 2. Establish and complete the payroll register for each weekly pay period during December. When calculating federal income tax withholding, use the withholding tables where possible, and refer to the percentage method only when necessary. For simplicity, calculate the state income tax withholding as 5% of each employee's taxable pay (which is the same as taxable pay for FWT). Recall that state income tax withholding would ordinarily be calculated using the applicable state's withholding tables. Payroll checks are remitted to the employees in the same order (Cranston, Harrison, Parker, Sternberg) each pay period and are written from a bank account that is used solely for these payments. The first payroll check written in December is check #762 Note that all charitable contributions are deemed to be made on the final day of each pay period. The following information will be required for the completion of these records for the two employees who are compensated via an hourly wage: Weekly Hours Worked Weekly Start Date Hunter Cranston Allison Harrison November 28 December 5 December 12 December 19 40 37 38 41 43.5 0 40 0 WARNING! The above dates are weekly start dates. Refer to a calendar to determine the weekly end dates and associated pay dates. Keep in mind that tax liability and payment amounts are determined based on the weekly pay dates. 3. Complete the employee earnings records for December for each of the four employees. Divide the voluntary deductions from the payroll register appropriately across the associated columns within the employee earnings records. If directed to do so by your instructor, record the necessary journal entries for each pay period. 4. Complete Form 941 for the 4th quarter. Note that based on the lookback period, the company is a monthly depositor. Assume that all necessary deposits were made on a timely basis and that the employer made deposits equal to the total amount owed for the quarter. Although Virginia quarterly state payroll forms are also filed by Ellipses Corp., you will not complete these. If directed to do so by your instructor, record the necessary journal entries associated with Form 941 (including those required for any tax payments made). NOTE! Recall from the Form 941 Rounding Considerations section that quarter- and year-end tax figures should not be calculated based on the total taxable earnings for the respective quarter or year. Instead, to avoid rounding discrepancies, tax figures within Part 2 of Form 941 should be determined for each employee by adding the individual taxes across each pay period. 5. Complete Form 940 for Ellipses Corp. Note that FUTA payments are made only when required (i.e., if the employer is permitted to postpone the payment of these taxes, it will do so until a point in time when payment must be remitted). If directed to do so by your instructor, record the necessary journal entry associated with Form 940. 6. Calculate total SUTA tax owed by the employer. Although Ellipses Corp. will file state forms in which this figure is reported, you are required to calculate only the total amount owed for the year. 7. Complete Copy A of Form W-2 for each of the four employees. State wages were the same as federal wages subject to federal withholding tax for each of the four employees, and the state identification number for Ellipses Corp. is the same as its federal Employer Identification Number. 8. Complete Form W-3 for Ellipses Corp. Note that the company files the paper version of the form and selects "None apply" in the kind of Employer section. What do I submit for grading? Step 1: (pdf file, whenever possible) . Complete Employee Earning Records for each of the four employees (top portion only: name, address, ssn#, martial status, fed withholding allowance, state withholding allowance) Step 2: (pdf file, whenever possible) . Complete Payroll Register for each of the four employee: (see example in the module) Step 3: (pdf file, whenever possible) . Complete The Earnings & Deductions for Employee Earnings Record for each of the four employees (fill in the information for all for pay periods: Dec 4, Dec 11, Dec 18 Dec 25) Record the Journal Entries for End of cycle (recording employer payroll tax expenses): 12/4 through 12/25 (should be 4 journal entries - one for each pay period) Record the Journal Entries for pay December's periods (payment of Salaries wages to employees): 12/4 through 12/25 (should be 4 journal entries - one for each pay period) FUTA Calculation SUTA Calculation FICA - Employer Step 4: (pdf file, whenever possible) complete Form 941 (2020) - Employer's Quarterly Federal Tax Return . Record the Journal Entry for monthly payment of federal taxes: dated 1/15 *** should be 1 journal entries *** (line 13 should be $19,001.86) Step 5: Calculate total payments to all employees Complete the Form 940 (2019) *** (line 14 should be $168.00) . Complete the Form 940-V (2019) - completed at the same time as the Form 940;This pay voucher form is remitted with annual FUTA tax payments & must be completed when payment is included with Form 940 Step 6: (could type Step into the text box below) Calculate total SUTA Taxes Owed (total for all 4 employees) Step 7: Complete Copy A of Form W-2 for each of the four employees. Complete employees earning records, form W-2 (2020) for each of the four employees ***** it will help to complete the earning records for each employee, so that your calculations will correct (see example in module) Step 8: (pdf file, whenever possible) Complete the Form W-3 (2020) - a summary of all information on the W-2 forms; submitted to the Social Security Administration, (by the employer) at the same time as the W-2 Forms. 240 Payroll Accounting Chapter 7. Comprehensive Projects-Paper-Based versions One-Month Project NOTE! Templates needed to complete these exercises, including one containing year-to-date payroll data, are included in the Student Exercise Files download for this course. Ellipses Corp. is a small business that operates in Herndon, VA. The company is located at 10 Period Lane, Herndon, VA 20170. Its federal Employer Identification Number is 77-7777777, and its president, who signs all tax forms, is John Parker (telephone #571-555-0073). The company does not wish to name a third-party designee on forms. During 2020 four individuals are employed by Ellipses Corp. These employees are as follows: Social Security 111-11-1111 Federal W/H State W/H Marital Allowances Allowances Status 2 2 Married 777-77-7777 4 3 Married Name Address Hunter Cranston 85 Southern Road Herndon, VA 20170 Allison Harrison 203A Pine Court Herndon, VA 20170 John Parker 212 Tradition Lane Herndon, VA 20170 Pierre Sternberg 41 Seward Boulevard Herndon, VA 20170 444-44-4444 1 1 Single 333-33-3333 N/A N/A Married Note that Pierre Sternberg was hired in November, and his first day of work was Monday, November 23. On his W-4 Form Pierre checked box 2c and left sections 3 and 4 blank. Pierre files as married filing jointly on his tax return. Additionally, due to an economic downturn, Allison Harrison was laid off in mid-December, with her last day of work on Friday, December 11. All employees of Ellipses Corp. work a regular 40-hour workweek (thus all hours worked over 40 in a given week are overtime hours), receive overtime pay at a rate of 1.5 times the regular wage rate, and are paid weekly on Friday for the current week (which runs from Saturday through Friday, although employees never work on weekends). The SUTA tax rate applicable to Ellipses Corp. is 3.1%, while the SUTA wage base in Virginia is $8,000. Earnings and voluntary deduction information for each of the four employees is as follows: Regular Wage Rate Name Hunter Cranston Allison Harrison John Parker Pierre Sternberg $15/hour Weekly Charitable Contribution $5 $5 Annual Weekly 401(k) Salary Deduction N/A 6% of gross pay N/A 5% of gross pay $203,000.20 NA $112,000 20 1% of gross pay $23/hour N/A $20 N/A N/A One-Month Project 241 The first 11 months of the year have passed, and all payroll-related activity has been properly accounted for as of 11/30/2020. Payroll data for each of the four employees for the first three quarters of the year, as well as for the months of October and November, is as follows: Hunter Cranston Gross Federal State Social Medicare 401(k) Charitable Period Earnings Income Tax Income Tax Security Tax Tax Deduction Cont. 1st quarter 57,800 $221 $366.60 5483.60 $113.10 $468 $65 2nd quarter $7,800 $221 $366.60 $483.60 $113.10 $468 $65 3rd quarter $7,800 $221 $366.60 $483.60 $113.10 $468 $65 October $3,000 $85 $141 $186 $43.50 $180 $25 November $2,400 $68 $112.80 $148.80 $34.80 $144 $20 Allison Harrison Gross Federal State Social Medicare 401(k) Charitable Period Earnings Income Tax Income Tax Security Tax Tax Deduction Cont 1st quarter 511,960 5403 $568.10 5741.52 5173.42 $598 $65 2nd quarter $11,960 $403 $568.10 $741.52 $173.42 $598 $65 3rd quarter 511,960 5403 $568.10 5741.52 5173.42 5598 $65 October $4,600 $155 $218.50 $285.20 S66.70 $230 $25 November 53,680 $124 $174.80 $228.16 $53.36 $184 $20 John Parker Gross Federal State Social Medicare 401(k) Charitable Period Earnings Income Tax Income Tax Security Tax Tax Deduction Cont. 1st quarter $50,750.05 510,844.73 $2,537.47 $3,146.52 $735.93 SO $260 2nd quarter $50,750.05 510,844.73 $2,537.47 $3,146.52 $735.93 SO $260 3rd quarter $50,750.05 $10,844.73 $2,537.47 $2,244.36 $735.93 SO $260 October $19,519.25 $4,171.05 $975.95 SO $283.05 $100 November $15,615.40 $3,336.84 $780.76 SO $226.44 SO $80 8 242 Payroll Accounting Chapter 7: Comprehensive Projects-Paper-Based versions Pierre Sternberg Gross Federal State Social Medicare 401(k) Charitable Period Earnings Income Tax Income Tax Security Tax Tax Deduction Cont 1st quarters 50 2nd quarter so $0 50 SO SO 3rd quarter SO SO SO October November 52, 153.85 $31.23 $21.54 $0 SO SO SO so 8 8 co SO $0 $0 $0 SO 50 $0 $0 SO $0 SO SO $340.73 $106.62 $133.54 SO Note that all tax payments and filings are made on the due date. Based on the data provided here, you will complete the following: 1. Establish an employee earnings record for each of the company's four employees. Complete the top portion of each record 2. Establish and complete the payroll register for each weekly pay period during December. When calculating federal income tax withholding, use the withholding tables where possible, and refer to the percentage method only when necessary. For simplicity, calculate the state income tax withholding as 5% of each employee's taxable pay (which is the same as taxable pay for FWT). Recall that state income tax withholding would ordinarily be calculated using the applicable state's withholding tables. Payroll checks are remitted to the employees in the same order (Cranston, Harrison, Parker, Sternberg) each pay period and are written from a bank account that is used solely for these payments. The first payroll check written in December is check #762 Note that all charitable contributions are deemed to be made on the final day of each pay period. The following information will be required for the completion of these records for the two employees who are compensated via an hourly wage: Weekly Hours Worked Weekly Start Date Hunter Cranston Allison Harrison November 28 December 5 December 12 December 19 40 37 38 41 43.5 0 40 0 WARNING! The above dates are weekly start dates. Refer to a calendar to determine the weekly end dates and associated pay dates. Keep in mind that tax liability and payment amounts are determined based on the weekly pay dates. 3. Complete the employee earnings records for December for each of the four employees. Divide the voluntary deductions from the payroll register appropriately across the associated columns within the employee earnings records. If directed to do so by your instructor, record the necessary journal entries for each pay period. 4. Complete Form 941 for the 4th quarter. Note that based on the lookback period, the company is a monthly depositor. Assume that all necessary deposits were made on a timely basis and that the employer made deposits equal to the total amount owed for the quarter. Although Virginia quarterly state payroll forms are also filed by Ellipses Corp., you will not complete these. If directed to do so by your instructor, record the necessary journal entries associated with Form 941 (including those required for any tax payments made). NOTE! Recall from the Form 941 Rounding Considerations section that quarter- and year-end tax figures should not be calculated based on the total taxable earnings for the respective quarter or year. Instead, to avoid rounding discrepancies, tax figures within Part 2 of Form 941 should be determined for each employee by adding the individual taxes across each pay period. 5. Complete Form 940 for Ellipses Corp. Note that FUTA payments are made only when required (i.e., if the employer is permitted to postpone the payment of these taxes, it will do so until a point in time when payment must be remitted). If directed to do so by your instructor, record the necessary journal entry associated with Form 940. 6. Calculate total SUTA tax owed by the employer. Although Ellipses Corp. will file state forms in which this figure is reported, you are required to calculate only the total amount owed for the year. 7. Complete Copy A of Form W-2 for each of the four employees. State wages were the same as federal wages subject to federal withholding tax for each of the four employees, and the state identification number for Ellipses Corp. is the same as its federal Employer Identification Number. 8. Complete Form W-3 for Ellipses Corp. Note that the company files the paper version of the form and selects "None apply" in the kind of Employer section. What do I submit for grading? Step 1: (pdf file, whenever possible) . Complete Employee Earning Records for each of the four employees (top portion only: name, address, ssn#, martial status, fed withholding allowance, state withholding allowance) Step 2: (pdf file, whenever possible) . Complete Payroll Register for each of the four employee: (see example in the module) Step 3: (pdf file, whenever possible) . Complete The Earnings & Deductions for Employee Earnings Record for each of the four employees (fill in the information for all for pay periods: Dec 4, Dec 11, Dec 18 Dec 25) Record the Journal Entries for End of cycle (recording employer payroll tax expenses): 12/4 through 12/25 (should be 4 journal entries - one for each pay period) Record the Journal Entries for pay December's periods (payment of Salaries wages to employees): 12/4 through 12/25 (should be 4 journal entries - one for each pay period) FUTA Calculation SUTA Calculation FICA - Employer Step 4: (pdf file, whenever possible) complete Form 941 (2020) - Employer's Quarterly Federal Tax Return . Record the Journal Entry for monthly payment of federal taxes: dated 1/15 *** should be 1 journal entries *** (line 13 should be $19,001.86) Step 5: Calculate total payments to all employees Complete the Form 940 (2019) *** (line 14 should be $168.00) . Complete the Form 940-V (2019) - completed at the same time as the Form 940;This pay voucher form is remitted with annual FUTA tax payments & must be completed when payment is included with Form 940 Step 6: (could type Step into the text box below) Calculate total SUTA Taxes Owed (total for all 4 employees) Step 7: Complete Copy A of Form W-2 for each of the four employees. Complete employees earning records, form W-2 (2020) for each of the four employees ***** it will help to complete the earning records for each employee, so that your calculations will correct (see example in module) Step 8: (pdf file, whenever possible) Complete the Form W-3 (2020) - a summary of all information on the W-2 forms; submitted to the Social Security Administration, (by the employer) at the same time as the W-2 Forms