ACCT137 – Payroll Procedure and Administration


This Assessment is part of the Assignments category, worth 25% of your grade.

Outcomes

Completing this Assessment will help you to meet the following:

Course Outcomes

  • Create personnel and payroll records to comply with tax law and payroll processing operations.
  • Audit the procedures and systems used to compute wages, salaries, and taxation.
  • Diagram and follow a complete payroll cycle.

Program Outcomes

  • Interpret and apply generally accepted accounting principles (GAAP) to analyze, record, and report financial information.
  • Select and utilize appropriate technology to complete accounting functions.

Institutional Outcomes

  • Information Literacy and Communication – Utilize appropriate current technology and resources to locate and evaluate information needed to accomplish a goal, and then communicate findings in visual, written and/or oral formats.
  • Relational Learning – Transfer knowledge, skills and behaviors acquired through formal and informal learning and life experiences to new situations.
  • Thinking Abilities – Employ strategies for reflection on learning and practice in order to adjust learning processes for continual improvement.
  • Community and Career – Participate in social, learning, and professional communities for personal and career growth.

Directions

Scenario:  You are the Payroll Accountant for Olney Company, Inc., a small manufacturing firm located in Allentown, PA.  Your manager, Director of Human Resources, is in the process of determining if and when the company should transition to an electronic payroll system.  She has directed you to complete the payroll for pay period ending January 8th

The Olney Company, Inc. has a workforce of both hourly and salaried employees.  Each employee is paid for hours actually worked during each week, with the time worked being recorded in quarter-hour increments.  The standard workweek consists of 40 hours, with all employees being paid time and one-half for any hours worked beyond the 40 regular hours. 

Wages are paid every Friday, with one week’s pay being held back by the company. Thus, the first payday for Olney is January 14th for the workweek ending January 8th (Saturday).  The information (provided in the excel spreadsheet) will be used in preparing the payroll for the pay period ending January 8th.

Ms. Carmen V. Ruppert prepares the time clerk’s report for each pay period.  Her report for the first week of operations is provided in the Excel spreadsheet template.  All employees, except for Marshall W. Olney, are paid for hours worked beyond 40 at one and one-half times their regular hourly rate of pay.

Directions:  Complete the payroll cycle using the template provided in Blackboard.  Follow the steps outlined below to ensure you complete all required parts of the process.

When completing this activity, do not use dollar signs $’s in your template as this is an internal document, so not using $’s saves time and makes the payroll register easier to read.  Also, and very important, you are working with money.  Your numbers need to be exact and rounded to the nearest cent.  All of your figures should have 2 decimal places.

Step #1: Payroll Register – Wages and FICA Taxes

Using the payroll register provided for Olney Company, complete the following step for the payroll period.  These are part of your responsibilities as the Payroll Accountant for the company:

  • Enter each employee’s time card number and name in the appropriate columns.  Record the regular hours and the overtime hours worked for each employee, using the time clerk’s report as your reference. 
  • Complete the regular earnings columns (rate per hour and amount) and the overtime earnings columns (rate per hour and amount) for each hourly employee.  For salaried employees complete the regular earnings column and show the hourly overtime rate and earnings only if overtime was worked. 
  • Record the total earnings for each employee by adding the regular earnings and overtime earnings.

Now, as part of your continued duties, you will now determine the amount of FICA taxes to be withheld from each employee’s pay for the pay period ending January 8th, 20xx.

  • In the taxable earnings columns, record the amount of each employee’s weekly earnings that is subject ot FICA taxes.

Step #2:  Payroll Register – FIT, SIT, and CITP taxes

  • Using the information recorded/calculated above, compute the taxes for each employee and record in the appropriate column.
  • Calculate the amount of income tax to withhold for each employee as part of your payroll duties. These are as follows:
  • In the appropriate columns of your payroll register, record the marital status and number of withholding allowances claimed for each employee, using the information provided.
  • Record the payroll deductions for the SIMPLE plan that the employer has established for participating employees.  All of the employees are participating, and their weekly contributions are listed in the Excel template.  The tax deferral on these deductions applies only to the federal income tax.
  • Record the amount of federal income taxes using the wage-bracket method (provided in the excel template).  Record the state income taxes on the gross weekly earnings for each employee. The rate is 3.07% for the state of Pennsylvania. Record the city income taxes on the gross weekly earnings of each employee.  The rate is 1.0% for the city of Allentown residents.

Step #3:  Payroll Register – SUTA and FUTA taxes

  • Now, as part of your continued Payroll Accountant duties, you will now compute the employer’s liability for unemployment taxes (FUTA and SUTA) for the pay of January 14th.  These computations will be used at the end of the project to complete the payroll journal entries, as required in your position.  To compute the employer’s liability for unemployment taxes, please proceed as follows:
  1. Enter each employee’s gross earnings in the taxable earnings for FUTA and SUTA.       
  2. Total the taxable earnings FUTA and SUTA columns.
  3. At the bottom of the payroll register, compute the Net FUTA tax.  Since this is the first pay period of the year, none of the employees are near the $7,000 ceiling; therefore, each employee’s gross earnings is subject to the FUTA tax.
  4. For SUTA tax, since Olney is a new employer, Pennsylvania has assigned the company a contribution rate of 3.689% on the first $10,000 of each employee’s earnings.  Employees pay 0.06% on total gross pay.

Step #4:  Journal Entries

In this last calculations phase of the payroll for the period, you will need to record the amounts withheld for group and health insurance and calculate the net pay for the each employee.

  • In the appropriate column of the payroll regiser, record the amount to be withheld for group life insurance.  Each employee contributes 85 cents each week toward the cost of group insurance coverage, with the exception of Palmetto and Wichman (Olney), who are not yet eligible for coverage under the company plan.
  • Record the amount to be withheld for health insurance.  Each employee contributes $1.65 each week toward the cost of health insurance. 
  • Record the net pay for each employee.  The net pay for each employee is obtained by subtracting the total amont of all deductions from the total earnings.
  • Each worker is to be paid by check.  Assign check numbers commencing with No. 313.
  • Foot all money columns of the payroll register, and provde the accuracy of the column totals.  
  • Prepare journal entries as of January 12th to record the payroll and the payroll taxes for the week ending January 8.  Credit Salaries Payable for the total net pay.  Use the following tax rates and bases: employer’s FICA- OASDI, 6.2% on the first $132,900; employer’s FICA – HI, 1.45% on total earnings; FUTA, 0.6% on the first $7,000; and SUTA 3.6785% on the first $9,750. 
  • Prepare the journal entry to record the payment of the payroll on January 14th when the paychecks are distributed to all workers.
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