Last revised: September 2021
SOLUTIONS MANUAL to accompany
Fundamental Accounting Principles 17th Canadian Edition by Larson/Dieckmann/Harris
th
Revised for the 17 Edition by: John Harris, Seneca College
Technical checks by: Rhonda Heninger, SAIT
Solutions Manual to accompany Fundamental Accounting Principles, 17th Canadian Edition. © 2022 McGraw Hill Ltd.
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Last revised: September 2021
Appendix I
Payroll Liabilities
Appendix Critical Thinking Challenge Questions* If payroll liabilities are not recorded, what is the effect on the financial statements? - If payroll liabilities are not recorded, expenses on the income statement will be understated causing profit to be overstated. On the balance sheet, unrecorded payroll liabilities will cause liabilities to be understated and equity to be overstated.
*The Appendix I Critical Thinking Challenge questions are asked in the text. Students are reminded at the conclusion of Appendix I, to refer to the Critical Thinking Challenge questions at the beginning of the Appendix. The solutions to the Critical Thinking Challenge questions are available here in the Solutions Manual and accessible to students accessible to students in the print and ebooks.
Solutions Manual to accompany Fundamental Accounting Principles, 17th Canadian Edition. © 2022 McGraw Hill Ltd.
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Last revised: September 2021
Concept Review Questions 1. Canada Pension Plan deductions are levied on employers, their employees, and the selfemployed. 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 1.58% 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 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 10.9% of annual pensionable earnings (in 2021). 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., and employment insurance taxes, and (3) supplies the data for employees‘ T-4 Forms. 10. An employer must pay Workers‘ Compensation, Canada Pension Plan, and Employment Insurance premiums. The amounts which get deducted from the wages of the employee are 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, an employer‘s contribution to retirement income programs of employees, and an employer‘s contribution for prescription and/or dental coverage.
Solutions Manual to accompany Fundamental Accounting Principles, 17th Canadian Edition. © 2022 McGraw Hill Ltd.
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Last revised: September 2021
QUICK STUDY Quick Study A1-1 EI Expense ($260 × 1.4) .............................. CPP Expense............................................... Total.............................................................
$364.00 205.00 $569.00
Quick Study A1-2 Mar. 31 Wages Expense................................................ 18,000.00 CPP Payable [($3,000 – $291.67)* × 5.45% × 6] EI Payable [($3,000 × 1.58%) × 6] .............. Income Taxes Payable ................................ Wages Payable ...........................................
885.62 284.40 3,600.00 13,229.98
$3,500 exemption ÷ 12 months = $291.67 exempt Quick Study A1-3 Mar.
31 Wages Payable ............................................................. Cash ...................................................................... To record payment of wages to employees.
13,229.98 13,229.98
Quick Study A1-4 EI Total Gross Premiu Income Deduction Office Sales Pay m Tax CPP s Net Pay Salaries Salaries 1,200.0 1,200.0 0 18.97 303.85 61.74 384.55 815.45 0 530.00 8.37 123.05 25.22 156.64 373.36 530.00 675.00 10.67 156.75 33.12 200.54 474.46 675.00 2,405.0 1,663.2 0 38.01 583.65 120.08 741.73 7 530.00 1,875.00
Solutions Manual to accompany Fundamental Accounting Principles, 17th Canadian Edition. © 2022 McGraw Hill Ltd.
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Last revised: September 2021
Quick Study A1-5 EI Total Gross Premiu Income Deduction Salaries Pay m Tax CPP s Net Pay Expense 2,010.0 1,734.8 2,010.0 0 31.76 149.70 93.65 275.11 9 0 2,115.0 1,806.9 2,115.0 0 33.42 175.25 99.37 308.04 6 0 4,125.0 3,541.8 4,125.0 0 65.18 324.95 193.02 583.15 5 0 Note: Ensure students are using the monthly federal and provincial tax deduction tables. Quick Study A1-6 Office Gross EI Pay Premium 2,500.0 0 39.50 1,800.0 0 28.44 4,300.0 0 67.94
Income Tax
CPP
750.00
128.91
540.00
90.76
1,290.00
219.67
Sales
Total Deductions
Net Pay Sal Exp Sal Exp 1,581.5 2,500.0 918.41 9 0 1,140.8 1,800.0 659.20 0 0 2,722.3 2,500.0 1,800.0 1,577.61 9 0 0
Income tax at 30%; EI & CPP from Payroll Tables Quick Study A1-7 Mar. 31
Wages Expense ($3,500 x 8) .................. 28,000.00 CPP Payable [($3,500 – $291.67)* × 5.45% × 8] EI Payable [($3,500 × 1.58%) × 8] . Income Tax Payable ($28,000 x 20%) Salaries Payable ............................
1,398.83 442.40 5,600.00 20,558.77
*$3,500 exemption ÷ 12 months = $291.67 exempt
Solutions Manual to accompany Fundamental Accounting Principles, 17th Canadian Edition. © 2022 McGraw Hill Ltd.
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