Start of Payroll Project

7-3a October 9, 20--

No. 1

The first payroll in October covered the two workweeks that ended on September 26 and October 3. This payroll transaction has been entered for you in the payroll register, the employees earnings records, the general journal, and the general ledger. By reviewing the calculations of the wages and deductions in the payroll register and the posting of the information to the employees earnings records, you can see the procedure to be followed each payday.

Wages and salaries are paid by issuing special payroll checks. When the bank on which they are drawn receives such checks, they will be charged against the payroll cash account.

Observe the following rules in computing earnings each pay period:

Do not make any deduction from an employees earnings if the employee loses less than 15 minutes of time in any day. Time lost that exceeds 15 minutes is rounded to the nearest quarter-hour and deducted. If the time lost by an employee is not to be deducted, the time clerk will make a notation to that effect on the Time Clerks Report.

In completing the time record columns of the payroll register for all workers, you should place an 8 in the day column for each full day worked (refer to the Payroll Register). If an employee works less than a full day, show the actual hours for which the employee will be paid.

In the case of an employee who begins work during a pay period, compute the earnings by paying the employees their weekly rate for any full week worked. For any partial week, compute the earnings for that week by multiplying the hours worked by the hourly rate of pay.

If time lost is to be deducted from a salaried employees pay, the employees pay must be determined by multiplying the actual hours worked for that week by the hourly rate. If hours are missed but no pay is deducted, include those hours in the Time Record columns on the payroll register. The following schedule shows the weekly and hourly wage rates of the salaried employees:

Employee	Weekly Rate	Hourly Rate
Ferguson, James C.	$1,125.00	$28.13
Ford, Catherine L.	610.00	15.25
Mann, Dewey W.	675.00	16.88
ONeill, Joseph T.	1,153.85	28.85
Russell, Virginia A.	600.00	15.00
Sokowski, Thomas J.	1,025.00	25.63
Williams, Ruth V.	611.54	15.29

Plant workers (Bonno and Ryan), other than supervisors, are employed on an hourly basis. Compute the wages by multiplying the number of hours worked during the pay period by the employees hourly rate.

The information needed and the sequence of steps that are completed for the payroll are presented in the following discussion.

The time clerk prepared Time Clerks Report Nos. 38 and 39 from the time cards used by the employees for these workweeks. In as much as the president, sales manager, sales representatives, and supervisors do not ring in and out on the time clock, their records are not included in the time clerks report, but their salaries must be included in the payroll.

1 The following schedule shows the hourly wage rates of the three hourly employees used in preparing the payroll register for the payday on October 9.

Employee	Hourly Rate
Bonno, Anthony V.	$17.60
Ryan, Norman A.	18.00
Student	14.00

2 The entry required for each employee is recorded in the payroll register. The names of all employees are listed in alphabetical order, including yours as Student. The Fold-out Ledgers needed to complete this project are bound at the back of the book.

No deduction has been made for the time lost by Williams. Thus, the total number of hours (80) for which payment was made is recorded in the Regular Earnings Hours column of the payroll register. However, a notation of the time lost (D) was made in the Time Record column. When posting to Williamss earnings record, 80 hours is recorded in the Regular Earnings Hours column (no deduction for the time lost).

In computing the federal income taxes to be withheld, the wage-bracket tables in Tax Table B at the back of the book were used.

Each payday, $8 was deducted from the earnings of the two plant workers for union dues (Bonno and Ryan).

Payroll check numbers were assigned beginning with check no. 672.

In the Labor Cost Distribution columns at the extreme right of the payroll register, each employees gross earnings were recorded in the column that identifies the department in which the employee regularly works. The totals of the Labor Cost Distribution columns provide the amounts to be charged to the appropriate salary and wage expense accounts and aid department managers and supervisors in comparing the actual labor costs with the budgeted amounts.

Once the net pay of each employee was computed, all the amount columns in the payroll register were footed, proved, and ruled.

3 An entry was made in the journal transferring from the regular cash account to the payroll cash account the amount of the check issued to Payroll to cover the net amount of the payroll; next, the entry was posted.

4 Information from the payroll register was posted to the employees earnings records.

Note that when posting the deductions for each employee, a column has been provided in the earnings record for recording each deduction for FICA (OASDI and HI), FIT, SIT, SUTA, and CIT. All other deductions for each employee are to be totaled and recorded as one amount in the Other Deductions column. Subsidiary ledgers are maintained for Group Insurance Premiums Collected and Union Dues Withheld. Thus, any question about the amounts withheld from an employees earnings may be answered by referring to the appropriate subsidiary ledger. In this project, your work will not involve any recording in or reference to the subsidiary ledgers.

5 The proper journal entry recorded salaries, wages, taxes, and the net amount of cash paid from the totals of the payroll register. The journal entry to record the payroll for the first pay in the fourth quarter appears below and in the general journal.

Administrative Salaries	2,307.69
Office Salaries	4,651.08
Sales Salaries	3,600.00
Plant Wages	4,898.00
??FICA Taxes PayableOASDI		958.33
??FICA Taxes PayableHI		224.14
??Employees FIT Payable		1,118.00
??Employees SIT Payable		474.55
??Employees SUTA Payable		10.85
??Employees CIT Payable		602.89
??Union Dues Payable		16.00
??Payroll Cash		12,052.01

The amounts charged the salary and wage expense accounts were obtained from the totals of the Labor Cost Distribution columns in the payroll register. The salaries and wages were charged as follows:

Administrative Salaries

Joseph T. ONeill (President)

Office Salaries

Catherine L. Ford (Executive Secretary)

Virginia A. Russell (Time Clerk)

Student (Accounting Trainee)

Ruth V. Williams (Programmer)

Sales Salaries

James C. Ferguson (Sales Manager)

Dewey W. Mann (Sales Representative)

Plant Wages

Anthony V. Bonno (Mixer Operator)

Norman A. Ryan (Electrician)

Thomas J. Sokowski (Supervisor)

FICA Taxes PayableOASDI and FICA Taxes PayableHI were credited for $958.33 and $224.14, respectively, the amounts deducted from employees wages.

Employees FIT Payable, Employees SIT Payable, Employees SUTA Payable, Employees CIT Payable, and Union Dues Payable were credited for the total amount withheld for each kind of deduction from employees wages. In subsequent payroll transactions, Group Insurance Premiums Collected will be credited for the amounts withheld from employees wages for this type of deduction. Finally, Payroll Cash was credited for the sum of the net amounts paid all employees.

6 The payroll taxes for this pay were then recorded in the general journal as follows:

Payroll Taxes	1,381.11
??FICA Taxes PayableOASDI		958.32
??FICA Taxes PayableHI		224.12
??FUTA Taxes Payable		22.91
??SUTA Taxes PayableEmployer		175.76

Payroll Taxes was debited for the sum of the employers FICA, FUTA, and SUTA taxes. The taxable earnings used in computing each of these payroll taxes were obtained from the appropriate column totals of the payroll register. Note that only part of Fords wages are taxable ($700 out of $1,220 gross pay) for FUTA ($7,000 limit). The computation of the debit to Payroll Taxes was:

FICA Taxes PayableOASDI was credited for $958.32, the amount of the liability for the employers portion of the tax. FICA Taxes PayableHI was credited for $224.12, the amount of the liability for the employers share of this tax. FUTA Taxes Payable was credited for the amount of the tax on the employer for federal unemployment purposes ($22.91). SUTA Taxes PayableEmployer was credited for $175.76, which is the amount of the contribution required of the employer under the state unemployment compensation law.

7 The journal entries were posted to the proper ledger accounts.

October 15

This is the day on which the deposits of FICA and FIT taxes and the city of Philadelphia income taxes for the September payrolls are due. However, in order to concentrate on the fourth-quarter payrolls, we will assume that the deposits for the third quarter and the appropriate entries were already completed.

October 20

No. 2

On this date, Glo-Brite Paint Company must deposit the Pennsylvania state income taxes withheld from the October 9 payroll.

The deposit rule states that if the employer expects the aggregate amount withheld each quarter to be $1,000 or more, the employer must pay the withheld tax semimonthly.

The tax must be remitted within three banking days after the close of the semimonthly periods ending on the 15th and the last day of the month.

1 Prepare the journal entry to record the deposit of the taxes, and post to the appropriate ledger accounts.

2 Pennsylvania has eliminated the filing of paper forms (replaced by telefile or online filing). The information needed to telefile is listed on page 7-51complete the information worksheet needed for the first semimonthly period of October. The companys Pennsylvania employer account number is 000-0-3300, its EIN is 00-0000660, its filing password is GBPCOM, and its telephone number is (215) 555-9559.