chapter 1 - wordpress.com · web viewpremium income taxes cpp* health insurance total deductions...

Chapter 11 Payroll Liabilities

Questions

1. Canada Pension Plan deductions are levied on employers, their employees, and the self-employed. Employees and the self-employed under the age of 18 and over the age of 70 are specifically exempt from the plan.

2. Workers’ Compensation premiums are paid by the employer. 3. Federal employment insurance taxes are paid by nearly all employees and their

employers. Employees pay at the rate of 1.87% of insurable earnings and the employers pay 1.4 times the amount deducted from the employees.

4. The employment laws have two main objectives: (1) payment of unemployment benefits to unemployed workers; and (2) stabilization of employees’ incomes.

5. Payroll deductions are remitted to the Receiver General for Canada on the 15th of each month; larger corporations may be required to remit deductions on the 10th and 25th of the month.

6. An employee’s gross earnings and the amount of his/her exemptions determine the income taxes to be withheld from the pay of employees.

7. Tax withholding tables indicate the tax to be withheld from any amount of wages and with any number of exemptions.

8. Covered self-employed individuals pay Canada Pension Plan deductions of 9.9% of annual pensionable earnings (in 2006).

9. Personal information about the employee plus a record of hours worked, gross pay, deductions, and net pay are accumulated on an employee’s individual earnings record. The information must be accumulated because payroll laws require its accumulation. The information: (1) serves as a basis for tax returns and reports, (2) tells when an employee’s earnings have reached the tax-exempt points for C.P.P., employment insurance taxes, and (3) supplies the data for employees’ T-4 Forms.

10. (a) An employer must pay Workers’ Compensation, Canada Pension Plan, and Employ-ment Insurance premiums.

(b) The employee has deducted from his/her pay CPP, income taxes, and Employment Insurance.

11. Employee fringe benefits are benefits to employees in addition to wages earned, the cost of which are paid by the employer. Examples are an employer’s contribution to employee’s insurance coverage and an employer’s contribution to retirement income programs of employees.

Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.Solutions Manual for Chapter 11 918

QUICK STUDY

Quick Study 11-1EI Expense ($260 × 1.4)..... $364.00CPP Expense..................... 205.00Total................................. $569.00

Quick Study 11-2Mar. 31 Wages Expense...............18,000.00

CPP Payable [($3,000 – $291.67)* × 4.95% × 6]804.37 EI Payable [($3,000 × 1.87%) × 6]336.60 Income Taxes Payable. . . 3,600.00 Wages Payable.............. 13,259.03

$3,500 exemption ÷ 12 months = $291.67 exempt

Quick Study 11-32006Marc

h31

Wages Payable............................ 13,259.03

Cash..................................... 13,259.03

To record payment of wages to employees.

Quick Study 11-4

Deductions PaymentDistribu

tion

Gross Pay

EI Premi

um

Income

Taxes CPP

Total Deducti

onsNet Pay

Sales Salaries

Office Salari

es

1.1200.

00 22.44298.7

056.0

7 377.21822.7

91200.

00

2.530.0

0 9.9185.3022.9

0 118.11411.8

9 530.00

3.675.0

0 12.62120.2

030.0

8 162.90512.1

0675.0

02405.

00 44.97504.2

0109.

05 658.221746.

78 530.001875.

00

Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.919 Fundamental Accounting Principles, Twelfth Canadian Edition

Quick Study 11-5Deductions Pay

Gross Pay

EI Premi

um

Income

Taxes CPP

Total Deductions Net Pay

Salaries

Expense

2010.00 37.59

298.25

85.06 420.90 1589.10

2010.00

2115.00 39.55

324.40

90.26 454.21 1660.79

2115.00

4125.00 77.14

622.65

175.32 875.11 3249.89

4125.00

Quick Study 11-6

DeductionsPayment Distribution

Gross Pay

EI Premi

um

Income

Taxes CPP*

Total Deducti

ons Net PaySales

Salaries

Office

Salaries

2500.00 46.75

750.00

117.09 913.84 1586.16 2500.00

1800.00 33.66

540.00

82.44 656.10 1143.90

1800.00

4300.00 80.41

1290.00

199.53 1569.94 2730.06 2500.00

1800.00

*$3,500 CPP exemption ÷ 26 weeks = $134.62 exempt

1. 2,500 x 1.87% = 46.752. 1,800 x 1.87% = 33.663. 2,500 x 30% = 750.004. 1,800 x 30% = 540.005. (2,500 – 134.62) x 4.95% = 117.096. (1,800 – 134.62) x 4.95% = 82.44


Quick Study 11-7Mar. 10 Wages Expense ($3,500 x 8) 28,000.00

CPP Payable [($3,500 – $291.67)* × 4.95% × 8]..................................1,270.50 EI Payable[($3,500 × 1.87%) × 8]523.60 Income Tax Payable (28,000 x 20%)5,600.00 Salaries Payable....... 20,605.90

*$3,500 exemption ÷ 12 months = $291.67 exempt

Quick Study 11-8Feb. 28

Office Salaries Expense................. 575.00

Sales Salaries Expense.................. 1,560.00

EI Payable................................ 39.92Employees’ Income Tax Payable 14.95CPP Payable............................. 62.37Salaries Payable...................... 2,017.

76

Quick Study 11-9Feb. 28

EI Expense1.................................. 55.89

CPP Expense2............................... 62.37EI Payable................................ 55.8

9CPP Payable............................. 62.3

7

Calculations:1. $39.92 x 1.4 = $55.892. $62.37 x 1 = $62.37

Quick Study 11-10Mar. 15

EI Payable1................................... 95.81

CPP Payable2................................ 124.74

Employees’ Income Taxes Payable. 14.95Copyright © 2007 by McGraw-Hill Ryerson Limited. All rights reserved.921 Fundamental Accounting Principles, Twelfth Canadian Edition

Cash........................................ 235.50

Calculations:1. $39.92 (Employees’ Portion) + $55.89 (Employer’s Portion) = $95.81 2. $62.37 (Employees’ Portion) + $62.37 (Employer’s Portion = $124.74

Quick Study 11-11Mar. 31 Benefits Expense............4,120.00

Employees’ Retirement Payable ($28,000 × 8%)2,240.00Medical Insurance Payable ($60 × 8)480.00Vacation Pay Payable ($28,000 × 5%)1,400.00


EXERCISES

Exercise 11-1 (15 minutes)Regular pay (172 hours @ $12.50). $2,150.00Overtime premium pay (12 hours @ $6.25) 75.00Gross pay..................................... $2,225.00EI deduction ................................ $ 41.61CPP deduction.............................. 95.70Income tax deduction ($151.00 + $201.30) 352.30Total deductions........................... 489.61Net pay........................................ $1,735.39

Exercise 11-2 (30 minutes)Deductions

EmployeeGrossPay

EIPremi

umIncome Taxes CPP*

HealthInsuran

ce

Total Deducti

onsNet Pay

Hellena Chea 720.00 13.461 133.55 32.315 24.00 203.32 516.68Joseph Lim 610.00 11.412 104.65 26.866 24.00 166.92 443.08Dino Patelli 830.00 15.523 169.70 37.757 36.00 258.97 571.03Sharl Qulnata

1,700.00 31.794 486.90 80.828 24.00 623.51

1,076.49

Totals3,860.0

0 72.18 894.80177.74 108.001,252.7

22,607.2

8

*$3,500 exemption ÷ 52 weeks = $67.31 exempt per week

1. $720 × 1.87% = $13.46

5. ($720 – $67.31) × 4.95% = $32.31

2. $610 × 1.87% = $11.41

6. ($610 – $67.31) × 4.95% = $26.86

3. $830 × 1.87% = $15.52

7. ($830 – $67.31) × 4.95% = $37.75

4. $1,700 × 1.87% = $31.79

8. ($1,700 – $67.31) × 4.95% = $80.82

May 5 Office Salaries Expense............. 3,860.00Employees’ Income Taxes Payable

894.80


CPP Payable........................ 177.74Employees’ Health Insurance Payable

108.00EI Payable........................... 72.18Salaries Payable.................. 2,607.28


Exercise 11-3 (10 minutes)Deductions Pay Distribution

Employee Gross EI Income

United Total

Net Pay

Office Salaries

Sales Salarie

sPayPremi

um Taxes Way CPPDeductio

nsAkerley, D.

1,900.00 35.53 421.65 80.00 87.39 624.57

1,275.43

1,900.00

Nesbitt, M.

1,260.00 23.56 218.60 50.00 55.71 347.87 912.13

1,260.00

Trent, F.1,680.0

0 31.42 348.35 40.00 76.50 496.271,183.7

31,680.0

0Vacon, M.

3,000.00 56.10 815.00

300.00

141.84 1,312.94

1,687.06

3,000.00

Totals7,840.0

0146.611,803.6

0470.0

0361.4

4 2,781.655,058.3

51,900.0

05,940.0

0

Exercise 11-4 (25 minutes)Deductions

PayNet Pay

Distribution

Employee

GrossPay

EIPremi

um

Income

Taxes

Canada

Savings

Bonds CPP

United

Way

TotalDeductio

ns

Office Salari

es

Sales Salari

esCrimson, L.

1,995.00 37.31

276.30

150.00

84.32

99.75 647.68

1,347.32

1,995.00

Long, M.2,040.

00 38.15306.9

5 -0-86.5

4102.

00 533.641,506.

362,040.

00Morris, P.

2,000.00 37.40

295.70 -0-

84.56

100.00 517.66

1,482.34

2,000.00

Peterson, B.

2,280.00 42.64

305.75

200.00

98.42

114.00 760.81

1,519.19

2,280.00

Totals8,315.

00155.5

01,184.

70350.0

0353.

84415.

75 2,459.795,855.

211,995.

006,320.

00


Exercise 11-5 (25 minutes)

Deductions Payment Distribution

Employee

Gross Pay

EI Premi

umIncome Taxes CPP*

United Way

Total Deductio

nsNet Pay

Office Salarie

sSales

SalariesCrimson, L.

1,995.00 37.31 295.7084.32 99.75 667.08

1,327.92

1,995.00

Long, M.2,040.

00 38.15 306.9586.54102.0

0 533.641,506.

36 2,040.00Morris, P.

2,000.00 37.40 295.7084.56

100.00 517.66

1,482.34 2,000.00

Peterson, B.

2,350.00 43.95 380.50

101.89

117.50 843.84

1,506.16 2,350.00

Totals8,385.

00156.8

11,278.8

5357.3

1419.2

5 2,562.225,822.

781,995.0

0 6,390.00


Exercise 11-6 (15 minutes)Monthly salary................................. $2,050.00CPP deducted.................................. $ 87.04EI deducted..................................... 38.34Income tax withheld......................... 308.80 434.18Salary, net of deductions.................. $1,615.82

× 0.02Monthly contribution........................ 32.32

Feb. 28

Salaries Expense.....................................2,050.00

EI Payable.......................................... 38.34 CPP Payable....................................... 87.04 Employees’ Income Taxes Payable..................................................

308.80

United Way Payable........................... 32.32 Salaries Payable.................................1,583.

50

Exercise 11-7 (15 minutes)Mar. 24

Salaries Expense.....................................65,950.00

EI Payable.......................................... 1,233.27 CPP Payable....................................... 3,097.93 Employees’ Income Taxes Payable..................................................

28,439.95

Medical Insurance Payable.................. 1,150.00 United Way Payable........................... 1,319.00 Salaries Payable................................. 30,709.8

5

Exercise 11-8 (10 minutes)Mar. 24

EI Expense (1,233.27 × 1.4).....................1,726.58

CPP Expense...........................................3,097.93

EI Payable.......................................... 1,726.58 CPP Payable....................................... 3,097.93

Exercise 11-9 (10 minutes)Apr. 15

EI Payable (1,233.27 + 1,726.58).............2,959.85


CPP Payable (3,097.93 x 2)......................6,195.86

Employees’ Income Taxes Payable...........28,439.95

Cash.................................................. 37,595.66


Exercise 11-10 (15 minutes)1. May5 EI Expense................................ 101.05

CPP Expense............................. 177.74EI Payable ($81.06 × 1.4)...... 101.05CPP Payable......................... 177.74

2. 5 Benefits Expense....................... 494.00Employees’ Health Insurance Payable

108.00Employees’ Retirement Program Payable

386.00

Exercise 11-11 (20 minutes)Retirement Fund

Health CPP Contribution EI Contribution Contributions

InsuranceDoherty ($36,000 – 3,500) × 4.95% = $1,608.75 $36,000 × 1.87% = $ 673.20$ 3,600.00$1,440.00Fane. 1,910.70 729.306,100.001,440.00Kahan 1,910.70 729.305,900.00 1,440.00Martin ($37,000 – 3,500) × 4.95% = 1,658.25$37,000 × 1.87% = 691.90 3,700.001,440.00Poon. 1,910.70 729.30 4,800.00 1,440.00 Totals $8,999.10 $ 3,553.00 $24,100.00 $7,200.00

Payroll taxes and fringe benefits as a percentage of salaries:$8,999.10 + ($3,553.00 × 1.4) +

$24,100 + $7,200 = 18.79%$241,000

Exercise 11-12 (20 minutes)Apr.

30Salaries Expense ($2,080 × 12)........ 24,960

.00 EI Payable ($38.90 × 12)............. 466.80 CPP Payable ($88.52 × 12).......... 1,062.2

4


Employees’ Income Taxes Payable (315.70 × 12).....................

3,788.40

Salaries Payable......................... 19,642.56

30 EI Expense ($466.80 × 1.4) ............. 653.52

CPP Expense................................... 1,062.24

Benefits Expense – Retirement Program.........................................

1,996.80

Benefits Expense – Medical Insurance ($50 × 12).......................

600.00

EI Payable.................................. 653.52 CPP Payable............................... 1,062.2

4 Retirement Program Payable...... 1,996.8

0 Medical Insurance Payable.......... 600.00


Exercise 11-13 (30 minutes)Jan.31 Benefits Expense.......................... 22,507

Estimated Vacation Payable...... 22,507

$ 96,000 × (2/50) = $ 3,840 224,000 1 × (4/48) = 18,667

$320,000 $22,507

1. 320,000 x 70% = 224,000


PROBLEMSProblem 11-1A (55 minutes) Part 1

Payroll Register Earnings

Reg. O.T.Employee Daily Time Total O.T. Pay RegularPremiumGross

Employees No. M T W T F S S HoursHours Rate Pay Pay PayRay Loran 11 8 8 8 8 8 4 0 44 4 40.00 1,760.0080.00 1,840.00 1Kathy Sousa12 7 8 6 7 8 4 0 40 0 36.00 1,440.00 0.00 1,440.00 2Gary Smith 13 8 8 0 8 8 4 4 40 0 32.00 1,280.00 0.00 1,280.00 3Nicole Parton14 8 8 8 8 8 0 0 40 0 40.00 1,600.00 0.00 1,600.00 4Diana Wood 15 0 6 6 6 6 8 8 40 0 36.00 1,440.00 0.00 1,440.00 5

7,520.0040.00 7,600.006

Week Ended June 16, 2006Office Service

Employment Income Hospital Union Total Net Wages Wages

Insurance CPP* TaxInsuranc

e DuesDeductio

ns Pay Expense Expense

1 **0.00 **0.00 368.00 40.00 16.00 424.001,416.0

0 1,840.002 **0.00 **0.00 288.00 40.00 15.00 343.001,097.0 1,440.00

Copyright © 2007 by M

cGraw

-Hill Ryerson Lim

ited. All rights reserved.Solutions M

anual for Chapter 11927

03 23.94 60.03 256.00 40.00 14.00 393.97 886.03 1,280.00

4 29.92 75.87 320.00 40.00 16.00 481.791,118.2

1 1,600.00

5 26.93 67.95 288.0

0 40.00 15.00 437.88 1,002

.12 1,440.00

80.79 203.851,520.0

0 200.00 76.00 2,080.645,519.3

6 1,440.00 6,160.00

*$3,500 exemption 52 weeks = $67.31 exempt**Loran and Sousa have already paid the maximum EI and CPP

Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved.933 Fundamental Accounting Principles, Tenth Canadian Edition

Problem 11-1A (concluded) Part 2June 16 Office Wages Expense............ 1,440.00

Service Wages Expense............ 6,160.00EI Payable........................... 80.79CPP Payable........................ 203.85Employees’ Income Taxes Payable

1,520.00Employees’ Hospital Insurance Payable

200.00Employees’ Union Dues Payable

76.00Wages Payable.................... 5,519.36

16 EI Expense............................. 113.11CPP Expense............................ 203.85

EI Payable ($80.79 x 1.4)...... 113.11CPP Payable........................ 203.85

Problem 11-2A (20 minutes)

Part 1Jan.13 Sales Salaries Expense.............19,570.00

Office Salaries Expense............. 6,230.00Employees’ Income Taxes Payable

5,310.00EI Payable........................... 541.80CPP Payable........................ 1,177.14Employees’ Hospital Insurance Payable

930.00Employees’ Union Dues........ 420.00Salaries Payable.................. 17,421.06

Part 2Jan.13 EI Expense............................... 758.52

CPP Expense............................ 1,177.14Employees’ EI Payable ($541.80 × 1.4)

758.52Employees’ CPP Payable...... 1,177.14


Problem 11-3A (30 minutes) Part 1Feb. 10 Sales Salaries Expense........... 950.00

Office Salaries Expense............. 700.00Shop Salaries Expense............. 1,550.00

EI Payable........................... 22.44CPP Payable........................ 52.74Employees’ Income Taxes Payable

652.65Employees’ Medical Insurance Payable


64.00Salaries Payable.................. 2,248.17

Part 2Feb. 10 EI Expense............................. 31.42

CPP Expense............................ 52.74EI Payable ($22.44 × 1.4)..... 31.42CPP Payable........................ 52.74

Part 3Feb. 10 Benefits Expense................... 608.00

Employees’ Medical Insurance Payable160.00

Employees’ Retirement Program Payable($3,200 × 8%)................... 256.00

Estimated Vacation Pay Liability($3,200 × 6%)................... 192.00


Problem 11-4A (40 minutes)Mar.17 Employees’ Income Taxes Payable 1442.40

EI Payable................................ 350.06CPP Payable............................. 685.58

Cash................................... 2,478.04

31 Office Salaries Expense............. 2,600.00Shop Salaries Expense............. 5,200.00

Employees’ Income Taxes Payable1,442.40

EI Payable........................... 145.86CPP Payable........................ 342.79Employees’ Medical Insurance Payable


31 Benefits Expense...................... 858.00Employees’ Medical Insurance Payable

390.00Estimated Vacation Pay Liability

468.00 7,800 x 6% = 468.00.

31 EI Expense............................... 204.20CPP Expense............................ 342.79

EI Payable ($145.86 × 1.4). . . 204.20CPP Payable........................ 342.79

Apr.15 Employees’ Income Taxes Payable 1,442.40EI Payable (145.86 + 204.20).... 350.06CPP Payable (342.79 x 2).......... 685.58

Cash................................... 2,478.04

15 Employees’ Medical Insurance Payable 2,340.00Cash (1,560 + 390 + 390)..... 2,340.00


ALTERNATE PROBLEMS

Problem 11-1B (55 minutes) Part 1Payroll Register

Earnings

Reg. O.T.Employee Daily Time Total O.T. Pay RegularPremiumGross

Employees No. M T W T F S S HoursHours Rate Pay Pay PayBen Amoko 31 8 8 8 8 8 0 0 40 0 17.00 680.00 0.00 680.00 1Auleen Carson 32 7 8 8 7 8 4 0 42 2 18.00 756.00........18.00 774.00 2Mitale De. . 33 8 8 0 8 8 4 4 40 0 18.00 720.00 0.00 720.00 3Gene Deszca 34 8 8 8 8 8 0 0 40 0 15.00 600.00 0.00 600.00.....4Ysong Tan. 35 0 6 6 6 6 8 8 40 0 15.00 600.00 0.00 600.00 5

3,356.00 18.00 3,374.00 6

WEEK ENDED NOVEMBER 24, 2006Office Service

Employment Income Hospital Union Total Net Wages Wages

Insurance CPP* TaxInsuranc

e DuesDeductio

ns Pay Expense Expense

1 **0.00 **0.00 272.00 30.00 12.00 314.001,046.0

0 1,360.00

2 **0.00 **0.00 309.60 30.00 12.00 351.601,196.4

0 1,548.00

3 26.93 67.95 288.00 30.00 12.00 424.881,015.1

2 1,440.00

Copyright © 2007 by M

cGraw

-Hill Ryerson Lim

ited. All rights reserved.Solutions M

anual for Chapter 11931

4 22.44 56.07 240.00 30.00 12.00 360.51 839.49 1,200.00

5 22.44 56.07 240.0

0 30.00 12.00 360.51 839.4

9 1,200.00

6 71.81 180.091,349.6

0 150.00 60.00 1,811.504,936.5

0 1,548.00 5,200.00

*$3,500 exemption 52 weeks = $67.31 exempt**Amoko and Carson have already paid the maximum EI and CPP.

Copyright © 2002 by McGraw-Hill Ryerson Limited. All rights reserved.939 Fundamental Accounting Principles, Tenth Canadian Edition

Problem 11-1B (concluded)

Part 2Jun. 2 Office Wages Expense.............. 1,548.00

Service Wages Expense............ 5,200.00EI Payable........................... 71.81CPP Payable........................ 180.09Employees’ Income Taxes Payable

1,349.60Employees’ Hospital Insurance Payable


60.00Wages Payable.................... 4,936.50

2 EI Expense............................. 100.53CPP Expense............................ 180.09

EI Payable ($71.81 x 1.4)...... 100.53CPP Payable........................ 180.09

Problem 11-2B (20 minutes) Part 1Jan.13 Sales Salaries Expense.............23,400.00

Office Salaries Expense............. 5,820.00Employees’ Income Taxes Payable

6,180.00EI Payable........................... 613.62CPP Payable........................ 1,296.46Employees’ Hospital Insurance Payable

920.00Employees’ Union Dues........ 490.00Salaries Payable.................. 19,719.92

Part 2Jan.13 EI Expense............................... 859.07

CPP Expense............................ 1,296.46EI Payable ($613.62 × 1.4). . . 859.07CPP Payable........................ 1,296.46


Problem 11-3B (30 minutes)Part 1May 5 Sales Salaries Expense............. 1,250.00

Office Salaries Expense............. 720.00Shop Salaries Expense............. 1,740.00

EI Payable........................... 27.67CPP Payable........................ 66.60Employees’ Income Taxes Payable

811.00Employees’ Medical Insurance Payable



Part 2May 5 EI Expense............................... 38.74

CPP Expense............................ 66.60EI Payable ($27.67 × 1.4)..... 38.74CPP Payable........................ 66.60

Part 3May 5 Benefits Expense...................... 704.90

Employees’ Medical Insurance Payable185.50

Employees’ Retirement Program Payable ($3,710 × 8%)................... 296.80

Estimated Vacation Pay Liability ($3,710 × 6%)................... 222.60


Problem 11-4B (40 minutes)Mar.17 Employees’ Income Taxes Payable 1,212.00

EI Payable................................ 309.67CPP Payable............................. 595.58

Cash................................... 2,117.25

31 Office Salaries Expense............. 2,300.00Shop Salaries Expense............. 4,600.00

Employees’ Income Taxes Payable1,212.00

EI Payable........................... 129.03CPP Payable........................ 297.79Employees’ Medical Insurance Payable


31 Benefits Expense...................... 759.00Employees’ Medical Insurance Payable

345.00Estimated Vacation Pay Liability (6,900 × 6%) .......... 414.00

31 EI Expense............................... 180.64CPP Expense............................ 297.79

EI Payable ($129.03 × 1.4). . . 180.64CPP Payable........................ 297.79

Apr.14 Employees’ Income Taxes Payable 1,212.00EI Payable (129.03 + 180.64).... 309.67CPP Payable (297.79 × 2)......... 595.58

Cash................................... 2,117.25

14 Employees’ Medical Insurance Payable 2,070.00Cash (1,380 + 345 + 345)..... 2,070.00


ANALYTICAL AND REVIEW PROBLEMS

A&R Problem 11-1No answer given as it is dependent on the payroll deduction rates of the particular year.

A&R Problem 11-2Date Salary Expense.................................... XXX

Employees’ Income Tax Payable......... XXX EI Payable......................................... XXX CPP Payable...................................... XXX Hospital Insurance Payable................ XXX Union Dues Payable........................... XXX Salaries Payable................................ XXX

EI Expense........................................... XXX CPP Expense........................................ XXX

EI Payable......................................... XXX CPP Payable...................................... XXX

Benefits Expense.................................. XXX Hospital Insurance Payable................ XXX Retirement Plan Payable.................... XXX

Salaries Payable................................... XXX Cash................................................. XXX

EI Payable............................................. XXX CPP Payable.................................... XXX Employees’ Income Tax Payable............. XXX

Cash.................................................. XXX Hospital Insurance Payable.................... XXX

Cash.................................................. XXX Union Dues Payable............................... XXX

Cash.................................................. XXX Retirement Plan Payable....................... XXX

Cash.................................................. XXX


Ethics ChallengeEC 11-1

1. Companies withhold amounts from employees’ wages and salaries and hold the amounts “in trust” for the government and others. The amounts belong to the government and others and not the company. The amounts withheld must be sent to the government and others on a regular basis.

2. The ethical factor in this case revolves around the ownership of the amounts withheld. The owner of the company is suggesting that the amounts belonging to the government and others be used for his company rather than be sent to the rightful owner(s).

3. I would not recommend that Moe follow the owner’s “suggestions.” If Moe were a professional accountant (CGA, CA, CMA), the rules of ethics of his professional association would prohibit him from acting in such a manner. In addition, Moe may be putting himself in legal jeopardy because he would be misusing trust funds.

4. Moe should explain the nature of withholding amounts to the owner (i.e., they are the government’s funds, not the company’s) and that the amounts must be sent to the rightful owner on the due date. Some possibilities to consider:

— Put more pressure on the Pacific Rim customers to pay their bills.

— Obtain notes from the Pacific Rim customers and discount them with a factor.

— Prepare a new cash budget and return to the bank to request the needed loan a second time.

— Approach a new bank or other source for the needed loan.

— Delay paying accounts payable. This should be done in cooperation with the suppliers.

— Discuss the situation with a representative of the government. The govern-ment may grant a slight delay.


Critical Thinking Mini CaseCT 11-1Note to instructor: Student responses will vary therefore the answer here is only suggested and not inclusive of all possibilities; it is presented in point form for brevity.

This mini-case is based on a real life situation where the CRA was successful in pressing charges, imposing a fine, and collecting unremitted employer and employee taxes, CPP, and EI.

Problem(s):— Delta is not recording part-time wages as a wage

expense and remitting the appropriate payroll deductions which is unlawful in the eyes of CRA

Goal(s)*:— To correctly record salaries and wages and remit payroll

deductions as required by lawAssumption(s)/Principle(s):

— That as the new office manager, you will only perform duties for Delta Yard Maintenance that are ethical and lawful

Facts:— as presented

Conclusion(s)/Consequence(s):— record and remit payroll deductions in accordance with

the law— bring the past transactions to the attention of your

supervisor for the purpose of correcting the accounts and payroll remittances which could be costly and impact cashflow in the shortrun for Delta Yard Maintenance

*The goal is highly dependent on ”perspective.”


chapter 1 - wordpress.com · web viewpremium income taxes cpp* health insurance total deductions...

Documents