Payroll Accounting 2017

Required information

Wayland Custom Woodworking is a firm that manufactures custom cabinets and woodwork for business and residential customers. Students will have the opportunity to establish payroll records and to complete a month of payroll information for Wayland. Wayland Custom Woodworking is located at 1716 Nichol Street, Logan, Utah, 84321, phone number 435-555-9877. The owner is Mark Wayland. Wayland’s EIN is 91-7444533, and the Utah Employer Account Number is 999-9290-1. Wayland has determined it will pay their employees on a semimonthly basis. Federal income tax should be computed using the percentage method.

For Part 1 of this project, you will complete payroll for the entire fourth quarter (Q4) of 2016, which consists of the final six pay periods of the year.  Once payroll has been completed for the fourth quarter, you will then file the annual tax forms for Wayland as well as prepare each employee’s Form W-2 in Part 2.

The SUTA (UI) rate for Wayland Custom Woodworking is 2.6% on the first $32,200. The state withholding rate is 5.0% for all income levels and marital statuses, which will be used in computing Utah withholding tax for each employee using the tax tables provided below.

Rounding can create a challenge. For this project, the hourly rate for the individuals should be rounded to five decimal places. So take their salary and divide by 2,080 (52 weeks at 40 hours per week) for all full time employees, both exempt and nonexempt. For nonexempt employees, such as StevonVarden, Varden’s salary is $42,000 and is a nonexempt employee, so the calculation will be $42,000/2,080, which would give you $20.19231 per hour, and use this to compute the employee’s gross pay based on the number of hours worked.  When a nonexempt employee has worked overtime hours for a given pay period, take their regular hourly rate and multiply it by 1.5, round the result to 5 decimal places, and multiply the new rate by their number of overtime hours.

For exempt employees, such as Anthony Chinson, an hourly rate rounded to five decimal places should be determined using the same method shown above, but gross pay should be determined by taking the exempt employee’s yearly salary and dividing it by 24, which is the number of payroll periods with a semimonthly frequency.  For example, Chinson’s salary is $24,000 and is a full time employee.  Chinson’s hourly rate is $11.53846 (determined by taking $24,000/2,080), but as he is an exempt employee, the calculation for his gross pay will be $24,000/24, which would give you $1,000.  For pay periods that include paid holidays, ensure to distribute an exempt employee’s regular pay accordingly to holiday pay based on the number of hours that consist of the holidays for that period.

Employees are paid for the following holidays occurring during the final quarter:

  • Thanksgiving day and the day after, Thursday and Friday November 24-25
  • Christmas, which is a Sunday. When holidays occur on a weekend, the preceding Friday, December 23, is considered a holiday. Employees receive holiday pay for Monday, December 26.

For the completion of this project, refer to the tax-related information in the table below.  For federal withholding calculations, use the percentage method tables in Appendix C, which is provided below. For Utah state withholding calculations, use the Utah Schedule 3 tax tables linked below (ensure to use the appropriate Utah table based on each employee’s marital status). Both 401(k) and insurance are pretax for federal income tax and Utah income tax.

 

Federal Withholding Allowance (less 401(k), Section 125) $168.80 per allowance claimed
Semimonthly Federal Percentage Method Tax Table Appendix C Page 254 Table #3
Federal Unemployment Rate (employer only) (less Section 125) 0.6% on the first $7,000 of wages
State Withholding Rate (less 401(k), Section 125) See Utah Schedule 3, Table 1 or use the Excel Version of Schedule 3
State Unemployment Rate (employer only) (less Section 125) 2.6% on the first $32,200 of wages

The balance sheet for WCW as of September 30, 2016, is as follows:

Wayland Custom Woodworking
Balance Sheet
9/30/2016
Assets   Liabilities & Equity
Cash $ 1,125,000.00   Accounts Payable $ 112,490.00
Supplies   27,240.00   Salaries and Wages Payable    
Office Equipment   87,250.00   Federal Unemployment Tax Payable    
Inventory   123,000.00   Social Security Tax Payable    
Vehicle   25,000.00   Medicare Tax Payable    
Accumulated Depreciation, Vehicle       State Unemployment Tax Payable    
Building   164,000.00   Employee Federal Income Tax Payable    
Accumulated Depreciation, Building       Employee State Income Tax Payable    
Land   35,750.00   401(k) Contributions Payable    
Total Assets   1,587,240.00   Employee Medical Premiums Payable    
        Notes Payable   224,750.00
        Utilities Payable    
        Total Liabilities   337,240.00
        Owners’ Equity   1,250,000.00
        Retained Earnings  
        Total Equity   1,250,000.00
        Total Liabilities and Equity   1,587,240.00

October 1:

Wayland Custom Woodworking (WCW) pays its employees according to their job classification. The following employees comprise Wayland’s staff:

 

Employee Number Name and Address Payroll information
00-Chins Anthony Chinson Married, 1 Withholding allowance
530 Sylvann Avenue Exempt
Logan, UT 84321 $24,000/year + commission
435-555-1212 Start Date: 10/1/2016
Job title: Account Executive SSN: 511-22-3333
     
00-Wayla Mark Wayland Married, 5 withholding allowances
1570 Lovett Street Exempt
Logan, UT 84321 $75,000/year
435-555-1110 Start Date: 10/1/2016
Job title: President/Owner SSN: 505-33-1775
   
01-Peppi Sylvia Peppinico Married, 7 withholding allowances
291 Antioch Road Exempt
Logan, UT 84321 $43,500/year
435-555-2244 Start Date: 10/1/2016
Job title: Craftsman SSN: 047-55-9951
   
01-Varde StevonVarden Married, 2 withholding allowances
333 Justin Drive Nonexempt
Logan, UT 84321 $42,000/year
435-555-9981 Start Date: 10/1/2016
Job title: Craftsman SSN: 022-66-1131
   
02-Hisso Leonard Hissop Single, 4 withholding allowances
531 5th Street Nonexempt
Logan, UT 84321 $49,500/year
435-555-5858 Start Date: 10/1/2016
Job title: Purchasing/Shipping SSN: 311-22-6698
   
00-Succe Student F Success Single, 1 withholding allowance
1650 South Street Nonexempt
Logan, UT 84321 $36,000/year
435-556-1211 Start Date: 10/1/2016
Job title: Accounting Clerk SSN: 555-55-5555
   

 

Voluntary deductions for each employee are as follows:

 

Name Deduction
Chinson Insurance: $50/paycheck
401(k): 3% of gross pay
Wayland Insurance: $75/paycheck
401(k): 6% of gross pay
Peppinico Insurance: $75/paycheck
401(k): $50 per paycheck
Varden Insurance: $50/paycheck
401(k): 4% of gross pay
Hissop Insurance: $75/paycheck
401(k): 3% of gross pay
Student Insurance: $50/paycheck
401(k): 3% of gross pay

 

 

The departments are as follows:

Department 00: Sales and Administration

Department 01: Factory workers

Department 02: Delivery and Customer service

 

You have been hired as of October 1 as the new accounting clerk. Your employee number is 00-SUCCE. Your name is Student F Success. Your address is 1650 South Street, Logan, UT 84321. Your phone number is 435-556-1211, you were born July 16, 1985, your Utah driver’s license number is 887743 expiring in 7/16/2018, and your Social Security number is 555-55-5555. You are considered a nonexempt employee, have one withholding allowance, and paid a rate of $36,000 per year.

Required: 
  1. Complete the payroll process for Wayland Custom Woodworking’s fourth quarter pay periods.  Please note that for pay periods after October 15, you mustcarry the current ending year to date (YTD) amounts as they appear from the prior pay period from each employee’s Employee Earning Records form (EERF) to the rows titled “Prior Period YTD”.  Amounts from the current pay period will be auto-populated to the employee EERFs once you complete the payroll register, and will be combined with the prior period YTD amounts to determine the new current ending YTD amounts.

For example, if the year to date gross pay for Anthony Chinsonis $5,000 after the October 31 pay period, you would take this amount and add it to the appropriate input box for gross pay on the “Prior Period YTD” row for their November 15 EERF.

Additionally, you must carry the ending balance from each account in the prior period General Ledger to the following period’s General Ledger to the input boxes titled “Ending account balance from the prior period” before posting the payroll journal entries from the current period to the Ledger.

For additional instructions on how to carry information from one pay period to another, along with a guided walkthrough example of this process, refer to the project user guide in the project information section above.

 October 15

October 15 is the end of the first pay period for the month of October. Employee pay will be disbursed on October 20, 2016. Any time worked in excess of 80 hours during this pay period is considered overtime for nonexempt employees. Remember that the employees are paid on a semimonthly basis.

 

  • Complete the Employee Gross Pay tab.
  • Complete the Payroll Register for October 15.
  • Refer to the Employee Earning Record Forms for each employee for the current YTD amounts after you have completed the October 15 Payroll Register. Amounts from the current period are auto-populated from the Payroll Register.
  • Complete the General Journal entries for the October 15 payroll.
  • Post the journal entries to the General Ledger.

Part 1

 

 

October 31 is the end of the final pay period for the month. Employee pay will be disbursed on November 4, 2016. Any hours exceeding 88 during this pay period are considered overtime for nonexempt employees. Compute the employee pay below. Update the Employees’ Earning Records for the period’s pay and update the YTD amount. Remember that the employees are paid semi-monthly.

 

Part 2

 

Part 3November 15

Compute the pay for each employee. Update the Employee Earning record for the period’s pay and the new YTD amount. Employee pay will be disbursed on November 18, 2016. Any hours exceeding 88 during this pay period are considered overtime for nonexempt employees. Remember that the employees are paid semimonthly.

 

Part 4 November 30

Compute the Net Pay for each employee. Employee pay will be disbursed on December 5, 2016. Update the Employees’ Earning Record with the November 30 pay and the new YTD amount.

The company is closed and pays for the Friday following Thanksgiving. The employees will receive holiday pay for Thanksgiving and the Friday following. All the hours over 88 are eligible for overtime for nonexempt employees as they were worked during the non-holiday week.

 

Part 4 December 15

Compute the net pay and update the Employees’ Earning Record with the December 15 pay and the new YTD information. Any hours worked in excess of 80 hours during this pay period are considered overtime for nonexempt employees.

 

 

Part 6 December 31

The final pay period of the year will not be paid to employees until January 3, 2017. The company will accrue the wages for the final pay period only. Since the pay period is complete, there will not be a reversing entry for the accrual.  As a result, paychecks will not be issued for this pay period since they will be paid in the following year and reflected on the Employee Earning Record forms for each employee when paid.

The company pays for the day before and the day of Christmas, and if the holiday is on a weekend, the company pays for the Friday before. Christmas fell on a Sunday, so employees will be paid for both the Friday and Monday as holiday pay.  Employees worked extra hours on Saturday during the week of 12/23-12/29.  Reminder, holidays and vacations are not included as hours worked for calculation of overtime.

 

 

Last Updated on February 11, 2019 by Essay Pro