Background information:

You have recently started working at an accounting firm and the partner has assigned one of the clients, White Lily Hair Salon Inc. (White Lily), to you. The Payroll Manager, Jasmine Kaur, has taken a leave of absence from White Lily so the owner, Tracy Williamson, would like you to help her with some questions she has about her companys payroll.

The following information about the business is available:

Company Name

White Lily Hair Salon Inc.

Industry

Hair & Aesthetic Services

Location

518 Beauty Way, Winnipeg, Manitoba R4R 3WT

Business Number

98765 4321 RC 0001

Number of employees

8 comprised of office personnel, hairdressers and assistants, which include both part-time and full time employees

Ages of employees

16 to 65

Salary range of employees

$25,000 to $132,000

Annual payroll

2020: $425,000 (actual)

2021: $450,000 (estimated)

Pay cycle

Biweekly

Tracy asks for your assistance with the following questions related to payroll:

1. My payroll administrator already translated the employees Federal and Manitoba TD1 Personal Tax Credit Returns to the appropriate claim code.

Im hiring a new employee next week. How can I determine their claim codes?

(1 point)

2. Do we need to request that employees complete the TD1 forms every year? Please explain when employees need to fill out the TD1 returns. (2 points)

3. Victoria Day is coming up. I know that most employees are paid extra for working on holidays. How exactly is statutory holiday pay calculated for employees that work part-time? If they do not work on Victoria Day, explain if part-time employees would still be paid, and, if so, how much? (3 points)

4. One of our full-time employees, Tina Magnolia, was scheduled to work on Good Friday; however, she missed her shift because her son was ill. How would this affect her general holiday pay? (2 points)

5. Every Friday, we post the work schedule for our hairdressers and my receptionist schedules their appointments. White Lily Hair Salon purchases salon quality haircare products for the hairdressers to use. We also have a classy shirt and apron that hairdressers wear to work.

a. Our hairdressers are currently hired as employees. I heard that there are advantages to hiring workers as independent contractors. From a business perspective, what are three advantages of hiring independent contractors instead of employees? (3 marks)

b. Could I have them sign a new contract to change them from employees to independent contractors? Use three of CRAs factors to consider to explain why or why not. (3 marks)

6. As you know, my Payroll Administrator, Jasmine Kaur, has gone on leave because she has adopted a baby. She has been my payroll administrator since January 16, 2019 and earns a salary of $43,160 per year.

a. Jasmine qualifies for a leave that would be covered under employment standards. What leave is she entitled to? State the criteria that has to be met and how long the leave would be. (4 points)

b. How much will our company have to pay her while she is on leave?

(1 point) + 1 possible bonus mark!

7. The company is registered with Workers Compensation (WCB). We have been assessed a pay rate of $0.24 per $100 for 2021.

a. Does this rate apply to the earnings for all employees, regardless of their position? It seems to me that the receptionist rate should be lower since they have less risk for workplace injuries. (1 point)

b. Weve never made a claim with Workers Compensation so I feel like we do not even need this insurance. Can I go ahead and cancel this coverage? (1 point)

c. What is the new business rate for our industry in 2021? Why is our rate different? (2 points)

8. I earn a salary from the company of $132,000 per year and the rest of our employees earn less than $48,000 each. Based on this information and our estimated annual payroll, how much would our estimated annual Workers Compensation insurance cost for 2021? Show and label your calculations. (4 points)

9. What are the different categories and rates for the Employer Health Tax in 2021? What will the different categories and rates be for 2022? (3 points)

10. Based on our estimated annual payroll, how much will the Employer Health Tax be for my company in 2021? (1 point)

11. Were a fairly small company, but I do try to treat my employees very well. Once a year, we have a special event where the entire staff goes out to dinner at a fancy restaurant and then to a concert or play together. Its fun and great for team building.

White Lily pays for all expenses, usually about $120 per person, when we have these events.

a. Explain if the value of this social event would be a taxable benefit for the employees.

(2 points)

b. Provide a web link and name of the CRA Guide where I can find more information. (1 point)

12. It would be helpful to have a reference chart with rates and maximums for payroll.

a. Could you please update the following chart for 2021 and 2022? (3 points)

b. Please include two other rates you feel would be helpful to have in this chart. (2 points)

Payroll rates & maximums:

2021

2022

Maximum annual insurable earnings

EI rate

Maximum annual employee EI premium

Maximum annual pensionable earnings

CPP rate

Maximum annual employee CPP contribution

13. The June 18, 2021 payroll register is summarized below. The company matches the employees payments for the retirement program and vacation pay is accrued at 8%. Please record the following:

a. What journal entries would be required to record this payroll register and employer expenses relating to this pay run? (8.5 points)

Office Salaries

Hairdresser Salaries

Total Earnings

EI Premium

CPP Premium

Income Tax

Retirement program

Charitable donations

6,500.00

9,850.00

16,350.00

258.33

883.74

4,905.00

654.00

120.00

Note: Assume any health taxes and WCB premiums will already be recorded.

Date

Account titles

Debit

Credit

b. Prepare the journal entry to send the remittances to the CRA for the above June 18th pay period on July 15th. (3.5 points)