Fundamental Accounting Principles, Vol 1, 15th Edition Test Bank

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ExamName___________________________________MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.1)Employers never make deductions from employees' wages for:1)A)Workers' Compensation.B)Canada Pension Plan.C)Union dues.D)Federal income taxes.E)Employment Insurance.Answer:AExplanation:A)B)C)D)E)2)Z Company's 6 sales employees earned salaries of $20,000 during the week of May 1-6,all of which were subject to 4.95% CPP and 2 weeks' annual vacation. In addition, ZCompany has agreed with its employees to withhold the following amounts: $376 for EI,$3,200 for federal and provincial income taxes, and $240 for union dues. Which of thefollowing entries should be prepared to record the payroll? If necessary, round allamounts to the nearest dollar.2)A)Sales Salaries Expense15,224Salaries Payable15,224B)Sales Salaries Expense14,970Payroll Taxes Expense5,060CPP Payable990Employees' Income Taxes Payable3,200EI Payable376Union Dues Payable240Salaries Payable15,224C)Sales Salaries Expense20,430CPP Payable990Employees' Income Taxes Payable3,200EI Payable376Union Dues Payable240Salaries Payable15,224Accrued Vacation Pay4001

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D)Sales Salaries Expense20,000CPP Payable990Employees' Income Taxes Payable3,200EI Payable376Union Dues Payable240Salaries Payable1,5194E)Sales Salaries Expense20,000Salaries Payable20,000Answer:DExplanation:A)B)C)D)E)2

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3)Dole Company employees had the following earnings records at the close of theNovember 30 payroll period:Dole Company's payroll benefits expense for each employee includes: 4.95% CPP and1.88% EI on the amount earned. What is the total payroll benefits expense for theNovember 30 pay period?3)A)$1,039.50 ($10,500 × .0495 × 2).B)$519.75 ($10,500 × .0495).C)$276.36 ($10,500 × (.0188 × 1.4)).D)$796.11 ($10,500 × (.0188 × 1.4) + ($10,500 × .0495)).E)$1,004.01 ($10,500 × ((.0495 + .0188) × 1.4)).Answer:DExplanation:A)B)C)D)E)4)The statute that requires an employer to complete a record of employment due totermination, illness, injury or pregnancy is called the:4)A)Employment Insurance Act.B)Income Tax Act.C)Workers' Compensation Act.D)R&R Act.E)Canada Pension Plan Act.Answer:AExplanation:A)B)C)D)E)3

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5)A payroll deduction required by the federal government and used to pay the cost of theemployment insurance programs is called:5)A)Employment insurance.B)Provincial employment tax.C)Contribution employment tax.D)Joint employment tax.E)Periodic employment tax.Answer:AExplanation:A)B)C)D)E)6)An amount of an employee's annual earnings not subject to income tax is the:6)A)Canada Pension Plan allowance.B)Employment insurance allowance.C)Workers' allowance.D)Workers' compensation allowance.E)Basic personal amount.Answer:EExplanation:A)B)C)D)E)7)M Company's 24 sales employees earned salaries of $20,000 during the week ofFebruary 1-6, all of which were subject to 4.95% CPP, and 3 weeks' annual vacation.The salaries are also subject to federal and provincial income tax withholdings of $3,500.M Company's employees also pay EI at the rate of 1.88%, and M Company's share is 1.4times the employees' contributions. Which one of the following entries should beprepared to record M Company'spayroll benefits expense?7)A)Benefits Expense1,502.40CPP and EI Payable1,502.40B)Sales Salaries Expense20,000.00CPP Payable990.00Employees Income Taxes Payable3,500.00Accrued Payroll Payable15,510.004

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C)CPP Expense990.00EI Expense526.40CPP Payable990.00EI Payable526.40D)Benefits Payable4,856.00CPP Payable990.00EI Payable366.00Employees' Income Taxes Payable3,500.00E)Benefits Expense1,364.40Payroll Taxes Payable1,364.40Answer:CExplanation:A)B)C)D)E)8)Most employers engaged in employing workers must pay:8)A)Workers' Compensation.B)Vacation pay.C)Canada Pension Plan.D)Employment Insurance.E)All of these answers are correct.Answer:EExplanation:A)B)C)D)E)5

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9)A tax levied by a province, the proceeds of which are used to pay benefits to workerswho have been injured on the job, is called:9)A)Provincial employment tax.B)Workers' Compensation.C)Owner's equity tax.D)Benefits tax.E)Management tax.Answer:BExplanation:A)B)C)D)E)10)A company has 10 employees who earned a total of $30,000 in January ($3,000 each).CPP taxes are 4.95% paid by employees and 4.95% paid by the employer. Income taxwithholdings amount to $4,500. The employee EI rate is 1.88% of the total, and theemployer EI contribution is 1.4 times the employee portion. The gross pay of the 10employees during January is:10)A)$28,230.B)$30,000.C)$33,209.D)$33,113.E)$29,190.Answer:BExplanation:A)B)C)D)E)11)A tax levied on the amount of a payroll or on the amount of an employee's gross pay isa(n):11)A)Employer tax.B)Employee tax.C)Payroll tax.D)Excess profits tax.E)Federal program.Answer:CExplanation:A)B)C)D)E)6

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12)Net pay is:12)A)The amount of an employee's pay due for income taxes.B)Gross pay minus source deductions.C)Gross pay plus employer's taxesD)The amount of an employee's pay before any deductions.E)None of these answers is correct.Answer:BExplanation:A)B)C)D)E)13)A record of an employee's hours worked, gross pay, deductions, net pay, and certainpersonal information about the employee is an employee's:13)A)Time card.B)T-4 earnings record.C)Federal tax record.D)Individual earnings record.E)Canada Revenue Agency record.Answer:DExplanation:A)B)C)D)E)14)A company's sales personnel earned salaries of $15,000 during the pay period December5-10, all of which were subject to 1.88% EI withholdings. All employees had reached theannual maximum earnings for the Canada Pension Plan. In addition, the company hasagreed with its employees to withhold the following amounts: $900 for hospitalinsurance, $2,600 for federal and provincial income taxes, and $180 for union dues.Calculate the general journal entry credit amount on December 10 to "Salaries Payable."14)A)$11,038.00.B)$11,218.00.C)Some other amount.D)$10,303.00.E)$15,000.00.Answer:AExplanation:A)No CPP deduction since already at maximum deductions for the year.B)No CPP deduction since already at maximum deductions for the year.C)No CPP deduction since already at maximum deductions for the year.D)No CPP deduction since already at maximum deductions for the year.E)No CPP deduction since already at maximum deductions for the year.7

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15)C Company has 7 employees who earned a total of $21,000 in March ($3,000 each). CPPdeductions are 4.95% paid by the employees and 4.95% paid by the employer. Incometax withholdings amount to $4,500. The employee EI rate is 1.88%. The take-home payof the 7 employees for March is:15)A)$20,607.30.B)$19,597.20.C)$19.960.50.D)$15,065.70.E)$21,000.00.Answer:DExplanation:A)B)C)D)E)16)The amount an employee earns before any deductions such as EI, CPP, and income taxwithholdings is the:16)A)Gross pay.B)Deductible pay.C)Take home pay.D)Taxable income.E)Net pay.Answer:AExplanation:A)B)C)D)E)SHORT ANSWER. Write the word or phrase that best completes each statement or answers the question.17)The payroll records of Jasper Co. provide the following data for the weekly payperiod ended March 7.CPP is 4.95% and EI is 1.88%.1) Prepare the general journal entry to accrue the payroll on March 7.2) Prepare the general journal entry to record the payroll tax expense for March 7.17)8

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Answer:1)Mar 7Salaries Expense1,800.00CPP Payable (1,800 × .0495)89.10EI Payable (1,800 × .0188)33.84Income Tax Payable422.00Medical Insurance Payable110.00Union Dues Payable30.00United Way Payable60.00Salaries Payable1,055.062)Mar 7CPP Expense89.10EI Expense (32.94 × 1.4)47.38CPP Payable89.10EI Payable47.38Explanation:9

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18)Birch Company has 5 sales employees, each of whom earns $2,500 per month andis paid the last working day of the month. CPP is 4.95% and EI is 1.88%.Withholdings for the employees also include federal and provincial income tax of$2,800 (total for all five) and medical insurance premiums of $210 for eachemployee.1) Prepare the general journal entry to accrue the payroll on March2) Prepare the general journal entry to record Birch Company's payroll tax expensefor March.18)Answer:1)Mar 31Sales Salaries Expense (5 × 2,500)12,500.00CPP Payable (12,500 × .0495)618.75EI Payable (12,500 × .0188)235.00Income Tax Payable2,800.00Medical Insurance Payable (5 x 210)1,050.00Salaries Payable7,796.252)Mar 31CPP Expense618.75EI Expense (235 × 1.4)329.00CPP Payable618.75EI Payable329.00Explanation:10

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19)A company's 18 sales personnel earned salaries of $15,000 during the periodMarch 5-10, all of which were subject to 4.95% CPP and 1.88% EI. All personnelare entitled to 2 weeks' paid annual vacation. In addition, the company has agreedwith its employees to withhold the following amounts: $900 for hospitalinsurance, $2,600 for federal and provincial income taxes, and $180 for uniondues. Prepare the March 10 general journal entry to record the payroll.19)Answer:March 10Sales Salaries Expense15,000.00CPP Payable742.50Employee Income Taxes Payable2,600.00Employee Hospital Insurance Payable900.00Employee Union Dues Payable180.00EI Payable282.00Salaries Payable10,295.50CPP = 15,000 × .0495EI = 15,000 × .0188Explanation:20)Big Company's 16 sales personnel earned total salaries of $15,000 during theperiod April 5-10, all of which were subject to 4.95% CPP, 1.88% EI. Theemployees were also entitled to 6% annual vacation pay.Prepare the general journal entries on April 10 to accrue the payroll benefits arisingfrom this payroll.20)Answer:April 10CPP Expense (15,000 × 4.95%)742.50EI Expense (15,000 × 1.88% × 1.4)394.80CPP Payable742.50EI Payable394.80April 10Benefits Expense (15,000 × 6%)900.00Estimated Vacation Pay Liability960.00Explanation:21)Haines Company prepared the following payroll summary for the current month:Administrative salaries$10,000Sales salaries15,000Shop wages21,000Employee deductions:Federal and provincial income taxes withheld11,500Hospital insurance premiums1,43021)11

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Hospital insurance premiums1,430Union dues1,190CPP is 4.95% and EI is 1.88%, and none of the current month's salaries and wagesexceed the CPP or EI limits. Haines makes a pension contribution equal to 9% ofeach employee's gross earnings. A vacation pay accrual is also made at 3.6% of thegross earnings. Haines has 10 employees.Prepare the journal entries to record:(A) The month's payroll accrual.(B) The month's employer payroll tax expense.(C) The employer's pension contribution and vacation pay accrual.Answer:A.Administrative Salaries Expense10,000.00Sales Salaries Expense15,000.00Shop Wages Expense21,000.00CPP Payable (46,000 × .0495)2,277.00EI Payable (46,000 × .0188)864.80Income Tax Payable11,500.00Hospital Insurance Premiums Payable1,430.00Union Dues Payable1,190.00Salaries Payable28,738.20B.CPP Expense2,277.00EI Expense (864.80 × 1.4)1,210.72CPP Payable2,277.00EI Payable1,210.72C.Benefits Expense5,796.00Employees Pension Fund Payable (46,000 × 9%)4,140.00Estimated Vacation Pay Liability (46,000 × 3.6%)1,656.00Explanation:22)Elkins Inc. has collected payroll data for the most recent weekly pay period.EmployeeReg.HoursOvertimeHrsPay RatePensionContributionsTaxWithheldCumulativeEarnings toEnd of PriorPeriodJ. Hogs40520.5048.00186.258,500.00T. WongSalary---1,200.00125.00400.0038,000.00C. Wue35614.0022.5090.0016,250.00F. Call40517.0049.50180.0054,520.00E. Mong40812.0031.20130.0013,120.0022)12

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CPP is 4.95% on the annual pensionable earnings of $46,600 ($53,600 maximumwith the first $3,500 exempt), matched by the employer, and EI is 1.88% to amaximum of $49,500 annually, with the employer paying 1.4 times the employees'contributions. Elkins' pension plan allows the employee to make designatedcontributions which are matched by the company. T. Wong is an administrativeemployee, and the other employees are shop workers. Employees are paid timeand a half for any overtime work.Prepare the journal entries to record:(a) The payroll accrual.(b) The employer payroll tax expense.(c) The employees' fringe benefits.Answer:Salary × .0495Salary × .0188SalaryCPPEIJ. Hogs973.7548.2018.31T. Wong1,200.0059.4022.56C. Wue616.0030.4911.58F. Call807.50Exempt*Exempt*E. Mong624.0030.8911.734,221.25168.9864.18*Note that F. Call would have already paid the maximum CPP and EI for theyear.(a)Shop Salaries Expense3,021.25Administrative Salaries Expense (T. Wong)1,200.00CPP Payable168.98EI Payable64.18Income Tax Payable986.25Employees Pension Fund Payable276.20Salaries Payable2,725.64(b)CPP Expense168.98EI Expense (64.18 × 1.4)89.85CPP Payable168.98EI Payable89.85(c)Benefits Expense276.20Employees Pension Fund Payable276.2013

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Answer:Explanation:23)Jack Slack is CEO of Slack Industries. The bank declined to give Slack Industriesthe needed funds to finance the business expansion plans. Jack is now looking forways to secure cash hoping he can get sufficient cash to finance the expansion.Jack approaches you as the company's accountant. He knows that you are due tomake government remittances for source deductions the company withheld fromemployees for CPP, EI, and personal income taxes. Jack asks you to delay theremittance until he feels more confident about getting other financing. Jackbelieves it is fine to delay payments because Slack will definitely remit thewithholdings before the T4s are produced at year end.Required:a) Describe the duty that Slack Industries has to remit employee deductionswithheld at source?b) Is withholding the remittances ethical? Why?23)Answer:Slack has a duty to remit employee withholdings on a predetermineschedule set by Canada Revenue Agency (CRA). Employers have until theend of February after the end of the previous tax year to send T4s to theirlocal federal tax office. That is the only time at which the CRA knows whathas been withheld for each employee for remittance. Failure to remitwithholdings n a regular basis can mean interest penalties for SlackWithholding remittances is payroll fraud on several levels. If entries are notmade to record withholdings, the financial statement liabilities can beunderstated and will overstate the current ratio. Further, employees would beunaware that withholdings are not being remitted on their behalf when thereis an expectation the company is executing their duties in compliance withCRA rules.Explanation:24)Blatt Company employees had the following earnings records at the close of theNovember 30 payroll period.Earnings Through LastPay PeriodEarnings For Nov 30 Pay Period(one week of service)B. Ashley$54,900$590G. Kingly24,000500K. Lamply19,200400M. Naplely4,800100S. Taftly10,800210Blatt Company's payroll taxes expense for each employee include: 4.95% CPP onthe annual pensionable earnings 50,100 ($53,600 maximum with the first $3,50024)14

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exempt), and 1.4 times the employees EI rate of 1.88% paid to a maximum of$49,500 annually. As well, $300 in federal and provincial income taxes will bededucted from the employees' gross pay for the week. Prepare the journal entries torecord:(a) The payroll accrual.(b) The employer payroll tax expense.Answer:Salary × .0495Salary × .0188SalaryCPPEIB. Ashley590.00Exempt*Exempt*G. Kingly500.0024.759.40K. Lamply400.0019.807.52M. Naplely100.004.951.88S. Taftly210.0010.403.941,800.0059.9022.74Note that B. Ashley would have already paid the maximum CPP and EI forthe year.(a)Nov 30Sales Salaries Expense1800.00CPP Payable59.90EI Payable22.74Income Tax Payable300.00Salaries Payable1,417.36(b)Nov 30CPP Expense59.90EI Expense (22.74 × 1.4)31.84CPP Payable59.90EI Payable31.84Explanation:TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.25)Employee (fringe) benefit costs represent expenses to the employer in addition to thedirect costs of salaries and wages.25)Answer:TrueFalseExplanation:15

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