Background: Jane (who is not paid by salary) has been running her business, KASE for some time. She has two salaried employees, Cassie and Karl, both of which have been working at KASE for two years. Cassie has an annual salary of $65,000, and Karl has an annual salary of $55,000. Their weekly salary is determined by dividing their annual salary by 52 weeks. The taxes that must be collected from each paycheck are as follows: FICA Social Security Tax at 7%, FICA Medicare Tax at 2%, Federal Income Tax at 25%, State Income Tax at 9%. These taxes are meant to be held and paid to the government. Monthly salaries are paid out at the 3rd of every month. KASEs year-end is based on the calendar year, so the last day is 12/31.

Month of December, 20X1 (4.5 work weeks total)

12/3/20X1 KASE pays out employee salaries accrued from the previous month (November 20X1 had a total of 4.3 work weeks, and no time off was taken). Note that there would have been an entry in November that determines Salaries Payable. You do not need to record this entry in Objective 1, but it will help to do it so that you can determine what Salaries Payable is.

12/30/20X1 KASE has had a really great year thus far in terms of sales, so a bonus is announced in the form of 5% of annual salaries for both Cassie and Karl, which will be booked as an adjusting entry at the end of the month. This bonus will be paid out in mid-January. Jane recalls that taxes also apply to Bonuses.

12/31/20X1 KASE makes an adjusting entry for accrual of the salaries for both Cassie and Karl for the days they worked in the month of December. The Bonus adjustment is also made.

Month of January, 20X2 (4 work weeks total)

1/1/20X2 KASE has not typically given out paid absences, but given the performance from last year, it decides to reward its employees with one week of vacation (labeled as PTO Benefit). KASE accrues this paid absence benefit for Cassie and Karl. If they do not take this one-week vacation by the end of the year, they lose it.

1/3/20X2 - KASE pays out employee salaries from the previous month

1/15/20X2 KASE pays out bonuses from the previous year

1/31/20X2 KASE makes an adjusting entry for accrual of the salaries for both Cassie and Karl for the days they worked in the month of January. Both Cassie and Karl took one week of Paid Time Off each in the month of January. KASE will factor this into the calculation of Januarys Salaries Expense accrual. Note: This question is a little tricky. Salaries Expense is expense for what employees earned by working.

Excel Tab 1

Objective 1: What are the Debit/Credit Journal Entries recorded for the business during the month of December and January? There is NO NEED to post the Journal Entries to the Ledger T-Accounts or do a Trial Balance.

Excel Tab 2+

Objective 2: What is the gross pay and net pay for Cassie and Karl in the paycheck they received on December 3rd 20X1?

Objective 3: What is the gross pay and net pay for Cassie and Karl in the paycheck they received on January 3rd 20X2?

Objective 4: What will the gross pay and net pay be for Cassie and Karl in the paycheck they will receive on February 3rd 20X2? Note: This one is a little tricky: PTO Benefits, just like Salary, are still subject to taxes

Objective 5: Which Journal Entries posted in Objective 1 affect the Income Statement? If you need a refresher on what the Income Statement is, reference Ch 1 and Ch 3. This knowledge will be important going forward

Objective 6: What affect did the 5% bonus at the end of 20X1 have on the 20X1 Income Statement?

Objective 7: What effect did the 5% bonus at the end of 20X1 have on the 20X2 Income Statement?

Objective 8: Assume that KASE receives a prepayment from Customer 1 of $1,000 worth of consulting services in 20X1 (Note: you do not need to create a Journal Entry for this). Assuming no consulting services were provided in 20X1 for Customer 1, is there Income Statement activity in 20X1 based on that prepayment? When would there be Income Statement activity and why?

Objective 9: Assume KASE didnt collect taxes from their employees paycheck. What impact would this have on KASEs employees in terms of their take home pay, and what subsequent impact would this have on KASEs financial statements (Balance Sheet and Income Statement: would any accounts be over/understated)? This one is a tougher conceptual question, so think about what KASE has to do every year in terms of taxes and what the implications are of forgetting to do things theyre held liable to do.

Background: Jane (who is not paid by salary) has been running her business, KASE for some time. She has two salaried employees, Cassie and Karl, both of which have been working at KASE for two years. Cassie has an annual salary of $65,000, and Karl has an annual salary of $55,000. Their weekly salary is determined by dividing their annual salary by 52 weeks. The taxes that must be collected from each paycheck are as follows: FICA Social Security Tax at 7%, FICA Medicare Tax at 2%, Federal Income Tax at 25%, State Income Tax at 9%. These taxes are meant to be held and paid to the government. Monthly salaries are paid out at the 3 of every month. KASE's year-end is based on the calendar year, so the last day is 12/31. Month of December, 20X1 (4.5 work weeks total) 12/3/20X1 - KASE pays out employee salaries accrued from the previous month (November 20X1 had a total of 4.3 work weeks, and no time off was taken). Note that there would have been an entry in November that determines Salaries Payable. You do not need to record this entry in Objective 1, but it will help to do it so that you can determine what Salaries Payable is. . 12/30/20X1 - KASE has had a really great year thus far in terms of sales, so a bonus is announced in the form of 5% of annual salaries for both Cassie and Karl, which will be booked as an adjusting entry at the end of the month. This bonus will be paid out in mid-January. Jane recalls that taxes also apply to Bonuses. 12/31/20X1 - KASE makes an adjusting entry for accrual of the salaries for both Cassie and Karl for the days they worked in the month of December. The Bonus adjustment is also made. Month of January, 20X2 (4 work weeks total) 1/1/20X2 - KASE has not typically given out paid absences, but given the performance from last year, it decides to reward its employees with one week of vacation (labeled as PTO Benefit). KASE accrues this paid absence benefit for Cassie and Karl. If they do not take this one-week vacation by the end of the year, they lose it. 1/3/20X2 - KASE pays out employee salaries from the previous month 1/15/20X2 - KASE pays out bonuses from the previous year 1/31/20X2 - KASE makes an adjusting entry for accrual of the salaries for both Cassie and Karl for the days they worked in the month of January. Both Cassie and Karl took one week of Paid Time Off each in the month of January, KASE will factor this into the calculation of January's Salaries Expense accrual. Note: This question is a little tricky. Salaries Expense is expense for what employees camed by working. Excel Tab 1 Objective 1: What are the Debit/Credit Journal Entries recorded for the business during the month of December and January? There is NO NEED to post the Journal Entries to the Ledger T- Accounts or do a Trial Balance. Excel Tab 2+ Objective 2: What is the gross pay and net pay for Cassie and Karl in the paycheck they received on December 3-20X1? Objective 3: What is the gross pay and net pay for Cassie and Karl in the paycheck they received on January 3 20x2? Objective 4: What will the gross pay and net pay be for Cassie and Karl in the paycheck they will receive on February 3" 20x2? Note: This one is a little tricky: PTO Benefits, just like Salary, are still subject to taxes Objective 5: Which Journal Entries posted in Objective l affect the Income Statement? If you need a refresher on what the Income Statement is, reference Ch 1 and Ch 3. This knowledge will be important going forward Objective 6: What affect did the 5% bonus at the end of 20X1 have on the 20X1 Income Statement? Objective 7: What effect did the 5% bonus at the end of 20x1 have on the 20X2 Income Statement? Objective 8: Assume that KASE receives a prepayment from Customer 1 of $1,000 worth of consulting services in 20X1 (Note: you do not need to create a Journal Entry for this). Assuming no consulting services were provided in 20x1 for Customer 1, is there Income Statement activity in 20X1 based on that prepayment? When would there be Income Statement activity and why? Objective 9: Assume KASE didn't collect taxes from their employees' paycheck. What impact would this have on KASE's employees in terms of their take home pay, and what subsequent impact would this have on KASE's financial statements (Balance Sheet and Income Statement: would any accounts be over/understated)? This one is a tougher conceptual question, so think about what KASE has to do every year in terms of taxes and what the implications are of forgetting to do things they're held liable to do. Page 1 of 2