APPENDIX H
Payroll Accounting
ASSIGNMENT CLASSIFICATION TABLE
Learning Objectives
Questions
Brief
Exercises
Exercises
A
Problems
B
Problems
1. Compute and record the
payroll for a pay period.
1, 2, 3, 5,
6, 7, 8
1, 2
1, 2, 3, 4
1A, 2A, 3A
1B, 2B, 3B
2. Describe and record
employer payroll taxes.
2, 3, 4, 8
3
3, 5
1A, 2A, 3A
1B, 2B, 3B
3. Discuss the objectives of
internal control for payroll.
9, 10
4
4A
4B
ASSIGNMENT CHARACTERISTICS TABLE
Description
Difficulty
Level
Time
Allotted (min.)
Prepare payroll register and payroll entries.
Simple
30–40
Journalize payroll transactions and adjusting entries.
Moderate
30–40
Prepare entries for payroll and payroll taxes; prepare
W-2 data.
Moderate
30–40
Identify internal control weaknesses and make
recommendations for improvement.
Simple
20–30
Prepare payroll register and payroll entries.
Simple
30–40
Journalize payroll transactions and adjusting entries.
Moderate
30–40
H-3B
Prepare entries for payroll and payroll taxes; prepare
W-2 data.
Moderate
30–40
H-4B
Identify internal control weaknesses and make
recommendations for improvement.
Simple
20–30
ANSWERS TO QUESTIONS
1. Gross pay is the amount an employee actually earns. Net pay, the amount an employee is paid,
3. No. When an employer withholds federal or state income taxes from employee paychecks, the
government.
4. FICA stands for Federal Insurance Contribution Act; FUTA stands for Federal Unemployment
5. A W–4 statement shows the employee’s name, address, social security number, marital status
income taxes withheld.
6. Payroll deductions can be classified as either mandatory (required by law) or voluntary (not
dues, and charitable contributions.
7. The employee earnings record is used in: (1) determining when an employee has earned
year.
8. (a) The three types of taxes are: (1) FICA, (2) federal unemployment, and (3) state
unemployment.
9. The main internal control objectives associated with payrolls are: (1) to safeguard company
assets from unauthorized payments of payrolls and (2) to assure the accuracy and reliability
of the accounting records pertaining to payrolls.
10. The four functions associated with payroll are: (1) hiring employees, (2) timekeeping, (3) preparing
the payroll, and (4) paying the payroll.
SOLUTIONS TO BRIEF EXERCISES
BRIEF EXERCISE H-1
Gross earnings:
Gross earnings …………………………………………………….. $808.00
Less: FICA taxes payable ($808 X 7.65%) ………………. $ 61.81
BRIEF EXERCISE H-2
Jan. 15 Salaries and Wages Expense …………………. 808.00
FICA Taxes Payable ($808 X 7.65%) …. 61.81
BRIEF EXERCISE H-3
Jan. 31 Payroll Tax Expense ………………………………. 11,634
FICA Taxes Payable ($84,000 X 7.65%) 6,426
Federal Unemployment Taxes
BRIEF EXERCISE H-4
SOLUTIONS TO EXERCISES
EXERCISE H-1
(a) 1. Regular 40 X $14.00 = $560.00
Overtime 4 X $21.00 = 84.00
(b) Salaries and Wages Expense …………………………….. 644.00
FICA Taxes Payable ……………………………………. 49.27
Federal Income Taxes Payable ……………………. 55.00
EXERCISE H-2
D. Marshall $4,500 X 7.65% = $344.25 Marshall’s total gross earnings
M. Olson ($2,000 X 6.2%) + ($4,500 X 1.45%) = $189.25. Olson’s total
A. Fernandez ($3,500 X 6.2%) + ($4,500 X 1.45%) = $282.25. Fernandez’s
total gross earnings for the year are $111,100. Thus, only
EXERCISE H-2 (Continued)
P. Rock ($4,500 X 1.45%) = $65.25 Rock’s gross earnings prior to
this pay period exceed the maximum amount subject to
EXERCISE H-3
(a) See next page.
(b) Jan. 31 Salaries and Wages Expense …………… 1,721.00
FICA Taxes Payable …………………. 131.65
EXERCISE H-3 (Continued)
(a) RAMIREZ COMPANY
Payroll Register
For the Week Ending January 31
Earnings
Deductions
Employee
Total
Hours
Regular
Overtime
Gross
Pay
FICA
Taxes
Federal
Income Taxes
Health
Insurance
Total
Net
Pay
W. Helton
C. Kenseth
J. Ruiz
Totals
46
42
43
$ 440.00
520.00
560.00
$1,520.00
$ 99.00
39.00
63.00
$201.00
$ 539.00
559.00
623.00
$1,721.00
$ 41.23
42.76
47.66
$131.65
$ 34.00
43.00
58.00
$135.00
$18.00
15.00
15.00
$48.00
$ 93.23
100.76
120.66
$314.65
$ 445.77
458.24
502.34
$1,406.35
Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) H-7
EXERCISE H-3 (Continued)
(b) Jan. 31 Payroll Tax Expense ………………………….. 238.35
FICA Taxes Payable ……………………. 131.65
Federal Unemployment Taxes
EXERCISE H-4
(a) (1) $1,100 [$10,000 see (2) below – $8,900].
(2) $10,000 (FICA taxes $765 ÷ 7.65%).
(b) Feb. 28 Salaries and Wages Expense ………… 10,000
FICA Taxes Payable ……………….. 765
Federal Income Taxes
28 Salaries and Wages Payable ………….. 7,340
EXERCISE H-5
(a) FICA tax ($786,000 X 6.2%) + ($850,000 X 1.45%) … $61,057
SUTA tax ($90,000 X 5.4%) ………………………………… 4,860
(b) Payroll Tax Expense …………………………………………. 66,637
FICA Taxes Payable …………………………………… 61,057
PROBLEM H-1A
Copyright © 2014 John Wiley & Sons, Inc. Weygandt, Financial Accounting, 9/e, Solutions Manual (For Instructor Use Only) H-9
(a) HILLMAN DRUG STORE
Payroll Register
For the Week Ended February 15, 2014
Earnings
Deductions
Employee
Hours
Regular
Over-
time
Gross
Pay
FICA
Fed.
State
U.F.
Total
Net Pay
A. Dingler
J. Patel
P. Grimm
L. Wang
Totals
35
42
44
48
490.00
480.00
480.00
480.00
1,930.00
0
36.00
72.00
144.00
252.00
490.00
516.00
552.00
624.00
2,182.00
37.49
39.47
42.23
47.74
166.93
40.00
27.00
57.00
52.00
176.00
14.70
15.48
16.56
18.72
65.46
0
5.00
7.50
5.00
17.50
92.19
86.95
123.29
123.46
425.89
397.81
429.05
428.71
500.54
1,756.11
SOLUTIONS TO PROBLEMS
PROBLEM H-1A (Continued)
(b) Feb. 15 Salaries and Wages Expense …………. 2,182.00
FICA Taxes Payable ……………….. 166.93
Federal Income Taxes
15 Payroll Tax Expense ……………………… 302.22
FICA Taxes Payable
($2,182 X 7.65%) …………………. 166.93
Federal Unemployment Taxes
(c) Feb. 16 Salaries and Wages Payable ………….. 1,756.11
(d) Feb. 28 FICA Taxes Payable
($166.93+ $166.93) ……………………… 333.86