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PROBLEM 11.1B (continued)
PAGE
POST.
REF.
1 2013 1
2 April 8 Payroll Taxes Expense 42600 2
GENERAL JOURNAL 28
DATE DESCRIPTION DEBIT CREDIT
PROBLEM 11.2B
PAGE
POST.
REF.
1 2013 1
2 July 7 Payroll Taxes Expense 21087 2
3 Social Security Tax Payable 12276 3
4 Medicare Tax Payable 2 8 71 4
5 Federal Unemployment Tax Payable 1 5 84 5
GENERAL JOURNAL 31
DATE DESCRIPTION DEBIT CREDIT
PROBLEM 11.3B
PAGE
POST.
REF.
1 2013 1
2 Oct. 15 Employee Income Tax Payable 1 06150 2
6 Deposit payroll taxes for September 6
7 7
GENERAL JOURNAL 31
DATE DESCRIPTION DEBIT CREDIT
PROBLEM 11.3B (continued)
PROBLEM 11.4B
State unemployment insurance = 0.023 × $20,335.00 =
PAGE
POST.
REF.
Analyze: If Brian Morris made the same amount for the quarter ended June 30, 2013,
PROBLEM 11.5B
PAGE
POST.
REF.
1 2014 1
Analyze: The balance of the Federal Unemployment Tax Payable account is zero.
DATE DESCRIPTION DEBIT CREDIT
$467.71
GENERAL JOURNAL
GENERAL JOURNAL 48
21
DATE DESCRIPTION DEBIT CREDIT
PROBLEM 11.5B (continued)
PROBLEM 11.5B (continued)
PROBLEM 11.6B
1.
2.
PAGE
POST.
REF.
1 2013 1
3.
WORK
CLASSIFICATION
WORK
CLASSIFICATION
Office work
7
DATE DESCRIPTION DEBIT CREDIT
INSURANCE
RATE
ESTIMATED
EARNINGS
ESTIMATED
PREMIUMS
ACTUAL
PREMIUMS
INSURANCE
RATE
$0.50/$100
ACTUAL EARNINGS
GENERAL JOURNAL
$264.85
$52,970
PROBLEM 11.6B (continued)
4.
PAGE
POST.
REF.
1 2013 1
2 Dec. 31 Workers’ Compensation Insurance Expense 50925 2
3 Workers' Compensation Insurance Payable 50925 3
4 4
CRITICAL THINKING PROBLEM 11.1
1.
2.
3.
4.
5.
CRITICAL THINKING PROBLEM 11.2
1.
GENERAL JOURNAL 88
DATE DESCRIPTION DEBIT CREDIT
Adjust workers’ compensation
Payroll information needed: the hourly rate paid the truck drivers; the rates for social security,
medicare, and federal and state unemployment taxes; and the employer’s obligations for workers’
Tony is not an employee. A self-employed person cannot be his or her own employee.
Guy is probably not an employee. He has the right to refuse jobs, which is not characteristic of an
employee’s rights.
Ken is an employee, paid on an hourly basis by Dr. Liu, who provides all facilities, supplies, and
equipment. He is not hired by the patients for professional services.
Lisa is not an employee. The employer does not provide a work place or tools. No one
directly supervises her activities. She has the freedom to decide when the work is to be done and how it
is to be done.
Ron is definitely a part-time employee. The titles of president, secretary, and treasurer make him
officially an employee.
The employees are hired and work under the control and direction of the employer. The employer Analyze:
CRITICAL THINKING PROBLEM 11.2 (continued)
2.
Truck Drivers:
Wages (110 × $48,000) $5,280,000
Social Security Tax ($5,280,000 × 0.062) 327,360
Medicare Tax ($5,280,000 × 0.0145) 76,560
State Unemployment Tax (110 × $7,000 × .05) 38,500
Truck Drivers:
Wages (30 × $48,000) $1,440,000
Social Security Tax ($1,440,000 × 0.0620) 89,280
Medicare Tax ($1,440,000 × 0.0145) 20,880
State Unemployment Tax (30 × $7,000 × 0.05) 10,500
NOTE: Federal income tax withholding is not a factor in this analysis since it is the employees'
obligation, not the employer’s.
YEARLY COST—CURRENT SYSTEM
YEARLY COST—PROPOSED SYSTEM
3. In addition to analyzing payroll costs, Davis should consider costs of operating the fleet of
delivery trucks. What is the current cost to operate the trucks? How much would be saved by
reducing the fleet? She should also consider the effect on employee morale of terminating 75
SOLUTIONS TO BUSINESS CONNECTIONS
Managerial Focus:
2.
4.
Ethical Dilemma:
1. 193,370 (317,000 X 61%)
2. $832.60 ($161 million ÷ 193,370 employees)
Teamwork:
Internet Connection:
Johan is paying $1,720 more per month for wages. The extra expense represents an additional
employee that he did not hire. He should consult his accountant to find the approval for an additional
sales associate. To prevent this from happening in the future, he should pass out the paychecks
personally to match the paycheck to the person.
Hire temporary employees for jobs that occur seasonally. Only pay 98% of deposit required. The IRS
states that 98% is considered in compliance. Stop any unnecessary overtime by requiring
management approval for all overtime. Find less expensive benefits.
The 940 and 941 form is available to download and use. However, the W-2, W-3, W-4 and W-5 must
be original forms.
different employee; distribution of paychecks by yet another person.
Premiums for workers’ compensation insurance are based on the amount earned by
classes of employees.
Experience rating is a potential source of tax savings.
SOLUTIONS TO PRACTICE TEST
Part A True-False
1. TRUE
18. FALSE
Part B Matching
1. j
