The following is a payroll sheet for Bayview Golf Corporation for the first week of November 2017.
Question:
The following is a payroll sheet for Bayview Golf Corporation for the first week of November 2017. The Employment Insurance rate is 1.88% and the maximum annual deduction per employee is $930.60. The employer's obligation for Employment Insurance is 1.4 times the amount of the employee deduction. Assume a 15% income tax rate for all employees, and a 4.95% CPP premium charged to both the employee and employer, up to an annual maxi- mum of $2,479.95 per employee. Union dues are 1% of earnings. Bayview is a private corporation following ASPE.
Instructions
(a) Complete the payroll sheet and prepare the necessary entry to record the payment of the payroll.
(b) Prepare the entry to record the employer's payroll tax expense.
(c) Prepare the entries to record the payments of the payroll liabilities
(1) To the Receiver General and
(2) To the employees' union. Assume that Bayview pays all payroll liabilities at the end of each month.
(d) What is the total expense that Bayview will report for the first week of November 2017 relative to employee compensation? (Ignore any vacation pay accrual.) What percentage of gross pay is the payroll tax expense? Will this percentage be a constant for all pay periods?
(e) Bayview's management is considering laying off all of its employees and immediately thereafter entering into con- tracts with each employee, creating a contractor relationship with the business. Bayview reasons that severance packages do not need to be paid because immediate reinstatement with the company will be made available to all employees. This way all payroll tax expenses are avoided and the total labour expense would not only be reduced but be characterized as contract service expense on the income statement. Assume the plan is put into place for the current year. As a potential investor who is looking at the current year's comparative income statement, how will your decisions be affected by the reclassification of labour costs?
A Corporation is a legal form of business that is separate from its owner. In other words, a corporation is a business or organization formed by a group of people, and its right and liabilities separate from those of the individuals involved. It may...
Step by Step Answer:
Intermediate Accounting
ISBN: 978-1119048541
11th Canadian edition Volume 2
Authors: Donald E. Kieso, Jerry J. Weygandt, Terry D. Warfield, Nicola M. Young, Irene M. Wiecek, Bruce J. McConomy