School of Business and Management AC122.01: Unit 8 Seminar July 27, 2011 School of Business and Management

Agenda Welcome Seminar Rules Chapter 7 Payroll Project Questions

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Bernard J. Bieg and Judith A. Toland Payroll Accounting 2011 Bernard J. Bieg and Judith A. Toland Chapter 7 Payroll Project

Welcome to unit 8 During the next two units you will have the opportunity to complete the final payroll project. (The first four parts are due in unit 8 while the second 4 parts are due in unit 9.) This will be our final seminar but I will be available via email and office hours if you have any questions.

Project Content/Context In this project, you are employed by Glo-Brite Paint Company. As the payroll clerk in the Accounting Department, you have been in charge of the payroll records since the company first began operations on January 5th of the current year. The company employs about 800 individuals; but for the purpose of this project, payroll records will be kept for only a dozen or so employees… By understanding the principles of payroll accounting for a few employees, you should be able to keep similar records for several hundred employees.

For the purposes of this project: You will assume that the payroll records, tax reports and deposits have been completed and filed for the first three quarters of the year. Your work will involve the processing of payrolls for the last quarter of the year

How to do the Payroll Project Start by Downloading the template from Unit 9 - you should be using the template called: Final_Payroll_Project_Bieg_2011.xls Final_Payroll_Project This template is color coded by Payroll, the Payroll register and the journal match by color You will complete the work on pages 7-1 through 7- 21 (January 15th transaction)

Steps to Complete Work VERY IMPORTANT!!!!!! Read everything carefully-begin on page 7-2. Pages 7-2 through 7-7 give the company information and the employee details Read and trace the transactions for the October 9th Payroll that has been done for you (pages 7-7 through 7-11) If you have questions-ask sooner rather than later. Take your time and start early.

Total Points The Final Project is worth 285 points; the final project will be broken down into eight (8) parts. For each part of the payroll project you should complete the Journal, General Ledger, Payroll Register, and the Employee Earnings Record as applicable.

Total Points - continued When completing the Payrolls, Complete the Payroll Register first, then Transfer each employee’s amounts to the Employee Earnings Record, then Complete the Journal entries applicable to the payroll, and then Post to the General Ledger.

Steps to Complete Work You have payrolls for the following dates: October 9 (this one has been done for you) October 23 November 6 November 13 November 20 December 4 December 14 December 18

The order to complete the work Complete the Payroll first! Next, transfer the individual employee payroll data to the Employee Earnings Record Then, complete the General Journal Be sure that when it says a deposit was made that you record it in the journal Lastly, post the transactions to the General Ledger Again, record any transaction in the journal in the appropriate account

Submitting your Work Each Part of the project will be submitted separately for grading, and you will submit the entire template. Each part will be graded separately and points awarded based on completion and accuracy. Be sure to look at the feedback provided. They will contain feedback so that you can make the necessary corrections that may affect your ending balances.

Unit 8 Complete the Payrolls, Employee Earnings Record, Journal Entries and Post to the Ledger for: November 20th November 30th You must use the template provided - work will not be graded if this template is not used. October 9th (this one has been done for you) October 23rd November 6th November 13th November 16th November 17th November 18th

Unit 8 Continued Part 1-(40 points) October 20 and October 23 transactions on pages 7-11 and 7-12, in the template this is color coded yellow. Use Journal page 42. Part 2-(40 points) November 4 and November 6 transactions on pages 7-13 and 7-14, in the template this is color coded blue. Use Journal page 43. Part 3-(30 points) November 13, November 16, November 17, and November 18 transactions on pages 7-14 through 7-16, in the template this is color coded dark pink. Use Journal page 44. Part 4-(40 points) November 20 and November 30 transactions on pages 7-16 and 7-17, in the template this is color coded orange. Use Journal page 45. ***The journal page numbers are on the top right had corner of each page.***

Unit 9 Complete the Payrolls, Employee Earnings Record, Journal Entries and Post to the Ledger for: December 18th January 6th January 8th January 15th You must use the template provided - work will not be graded if the template is not used December 3rd December 4th December 9th December 11th December 14th December 15th

Unit 9 Continued Part 5-(40 points) December 3 and December 4 transactions on pages 7-17 and 7-18, in the template this is color coded tan. Use Journal page 46. Part 6-(30 points) December 9, December 11, December 14, and December 15 transactions on pages 7-18 and 7-19, in the template this is color coded Gray. Use Journal page 47. Part 7-(40 points) December 18 transactions on pages 7-19 and 7-20, in the template this is color coded olive green. Use Journal page 48. Part 8-(25 points) January 6, January 8, and January 15 transactions on page 7-21. You can post these in the Journal that is white, Use Journal page 49.

Check Figures for the Payrolls October 9 (this one has been done for you) Total Earnings: $14,162.77 Net Pay: $ 11,243.20 October 23 Total Earnings: $14,484.69 Net Pay: $ 11,314.94 November 6 Total Earnings: $ 14,130.48 Net Pay: $ 11,069.64

Check Figures for the Payrolls November 13 Total Earnings: $ 2,079.32 Net Pay: $ 1,423.46 November 20 Total Earnings: $ 12,640.23 Net Pay: $ 8,398.81 December 4 Total Earnings: $ 14,431.09 Net Pay: $ 9,894.09

Check Figures for the Payrolls December 14 Total Earnings: $ 1,425.16 Net Pay: $ 1,306.30 December 18 Total Earnings: $ 66,922.49 Net Pay: $ 35,161.70

FICA Taxes Payable—OASDI 527.00 FICA Taxes Payable—HI 123.25 Practical Problems 6-3A A) Cal Ruthers, an employer, is subject to FICA taxes but exempt from FUTA and SUTA taxes. During the last quarters of the year, his employees earned monthly wages of $ 8,500, all of which is taxable. The amount of federal income taxes withheld each month is $1,040. Journalize the payment of wages, and record the payroll tax on November 30. Wages 8,500.00 FICA Taxes Payable—OASDI 527.00 FICA Taxes Payable—HI 123.25 Employees FIT Payable 1,040.00 Cash 6,809.75   Payroll Taxes 650.25 FICA Taxes Payable—OASDI 527.00 FICA Taxes Payable—HI 123.25

Practical Problems 6-3A continued B) Prior to posting the November 30 payroll transaction, FICA Taxes payable – OASDI, FICA Taxes Payable – HI, and employees FIT Payable had zero balance. Ruther must pay the FICA taxes and income taxes withheld on the November 30th payroll. Journalize the electronic transfer of the payroll taxes on December 15th. FICA Taxes Payable—OASDI 1,054.00 FICA Taxes Payable—HI 246.50 Employees FIT Payable 1,040.00 Cash 2,340.50

Practical Problems 6-4A The employees of Donnelly Music Company earn total wages of $4,690 during January. The total amount is taxable under FICA, FUTA and SUTA. The State contribution rate for the company is 3.6%. The amount withheld for federal income taxes is $685. Journalize the payment of the monthly wages, and record the payroll taxes. Wages 4,690.00 FICA Taxes Payable—OASDI 290.78 FICA Taxes Payable—HI 68.01 Employees FIT Payable 685.00 Cash 3,646.21   Payroll Taxes 565.15 FICA Taxes Payable—HI 68.01 FUTA Taxes Payable 37.52 SUTA Taxes Payable 168.84

Things to Remember If the employee has any pretax deductions, remember to subtract out that amount first before figuring FIT. When you are recording the transactions in the journal make sure that the “Payroll Cash” amount equals the “Net Pay” amount in the payroll register. When recording the transactions in the Ledger do not forget to record the employer portions of the taxes as well as the employee portions. The most common method to Calculate Overtime Pay: Calculate gross pay (40 hours x employee’s regular rate) OT rate then calculated by multiplying 1.5 x employee’s regular rate x hours in excess of 40

Remember these steps when Converting Period Wage Rates to Hourly Rates Used to calculate pay for salaried nonexempt employees Annualize salary Calculate regular gross Calculate hourly pay Calculate overtime (OT) rate - (1.5 x hourly rate) Add OT pay to regular gross

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