Providence, CPA, is engaged in the December 31, Year 2, audit of Bedside Inc. Bedside Inc. is a nonissuer in the medical sales industry. The company was founded by Jude Dean, M.D., and is backed by a number of venture investors. Bedside is a new player in the medical sales industry and as of Year 2, Bedside sells the following: medical devices, surgical devices, and diagnostic imaging equipment. As part of the payroll analytical procedures, the auditor needs to evaluate the significance of the differences between the recorded payroll amounts, as presented in the Selected Financial Information table below, and the expected values calculated by the auditor. The tolerable misstatement has been set at $10,000. The exhibits above include documents the auditor has gathered to aid in performing these analytical procedures, including the following:

	Wages and Salaries Year 1
	New Hire Report Year 2
	Year 2 Salaries and Wages Policy
	Year 2 Bonuses E-mail
	Health Insurance Premium E-mail

Use this information to complete the auditor's evaluation of the payroll expense accounts.

In column B, quantify your expectation for the expense account listed in column A.

Enter amount as positive whole dollars.

Enter a zero (0) if the expense account balance is zero.

Assume that the balances in the Selected Financial Information table below are reliable when they are needed for the evaluation of a different expense account.

For payroll tax expense, round the payroll tax rate to the thousandths place. For all other calculations, only round the final auditor's expected amount.

In column C, indicate whether there is a significant difference between the actual and expected expense account balance by selecting "Yes" or "No" from the option list.

Selected Financial Information	Year 2	Year 1
Salaries and wages expense	$720,000	$549,000
Bonus expense	361,500	240,000
Payroll tax expense	166,750	120,700
Health insurance expense	55,000	40,000

	A	B	C
1	Expense Account	Auditor's Expectation	Significant Difference Between Actual and Expected?
2	Salaries and wages expense
3	Bonus expense
4	Payroll tax expense
5	Health insurance expense

Wages and Salaries Year 1

Bedside Inc. As of 12/31/Y1
Employee Name	Employee ID	Sales Rep Type	Hire Date	Base Salary / Wage Year 1	Performance Rating Year 1
D. Dan	000009110	Medical Device	1/1/Y1	$ 83,000	1
T. Jack	000008818	Surgical Device	1/1/Y1	$ 79,000	3
G. Gabriella	000074565	Medical Device	1/1/Y1	$ 83,000	3
R. Ted	000003838	Diagnostic Imaging	1/1/Y1	$ 73,000	4
P. Kate	000009292	Surgical Device	1/1/Y1	$ 79,000	2
C. Meng	000044949	Diagnostic Imaging	1/1/Y1	$ 73,000	3
I. Jose	000022828	Surgical Device	1/1/Y1	$ 79,000	3
Total				$ 549,000

New Hire Report Year 2

Bedside Inc. 1/1/Year 2 - 12/31/Y2
Employee Name and Address	Employee ID	Hire / Effective Date	Sales Rep Type	Base Salary / Wage Year
Udell, Rose 224 Pine Ln Providence, RI 02901	000007667	7/1/Y2	Medical Device	$ 83,000
Montez, Jade 123 Foxhill Ave Providence, RI 02904	000009986	7/1/Y2	Surgical Device	$ 79,000
Owens, Karla 558 Brown Ave Providence, RI 02901	000088776	7/1/Y2	Surgical Device	$ 79,000

Year 2 Salaries and Wages Policy

Memo

To: All Medical Sales Employees

From: Robert Jones, Human Resources

Date: January 1, Year 2

Subject: YEAR 2 SALARY AND WAGES POLICY

Dear Medical Sales Professionals, Annual performance reviews and compensation discussions for Fiscal Year 1 were held during the month of December, Year 1. As discussing during your individual compensation meeting, your Fiscal Year 1 performance will directly affect your salary base for Year 2 as follows:

Performance Rating

Rating Category

Base Increase

1

Top Performer

7%

2

High Performer

5%

3

Average Performer

3%

4

Needs Improvement

0%

Please reach out to myself or your department managers if there are any questions regarding compensation. If you were hired prior to 1/1/Y2, your new base salary will be effective March 1, Year 2. New hires' compensation rates are effective as of hire date. Sincerely, Robert Jones, Human Resources

Year 2 Bonuses E-mail

From: N.Swchartz@Bedside.com
To: ALL EMPLOYEES
Date: November 10, Year 2
Subject: Year 2 Profit-Sharing Bonus
Dear Bedside Employees, Bedside Inc.'s Fiscal Year 2 results have been spectacular! Due to these excellent results, each employee will be receiving a profit-sharing bonus for Year 2. Your bonus will be in addition to your base salary. The total company bonus will be 5% of the company's total sales for Q1-Q3. Each employee's bonus will be calculated as a percentage of the total company bonus, based on his/her base salary as a percentage of total salaries. Bedside's sales results by product type are shown below.
	Sales Results Fiscal Y2 Q1-Q3
	Quarter	Product Type	Sales
	Q1	Surgical Device Medical Device Diagnostic Imaging	$900,000 $500,000 $800,000
	Q2	Surgical Device Medical Device Diagnostic Imaging	$1,100,000 $650,000 $750,000
	Q3	Surgical Device Medical Device Diagnostic Imaging	$1,300,000 $900,000 $1,000,000
	Total by Product	Surgical Device Medical Device Diagnostic Imaging	$3,300,000 $2,050,000 $2,550,000
		Grand Total	$7,900,000
Details of your individual bonus will be mailed in the coming week, and the bonus will come with your month-end paycheck. Keep up the good work! Sincerely, Nick, CEO Health Insurance Premium E-mail From: L.Eastland@Bedside.com To: auditsenior@providence.com Date: January 20, Year 3 Subject: Health Insurance Premiums Accounting Senior, As a response to your questions, health insurance premiums increased by 10% for Fiscal Year 2. We've done some re-negotiations this year and we anticipate health insurance premiums will decrease by 2% for Fiscal Year 3. Also, we offer only one health insurance plan to which all Bedside employees are subscribed. Therefore, each employee's monthly premium is the same. Sincerely, Larry