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Appendix A Continuing Payroll Project (3-Month Version) – Wayland Custom Woodworking

Payroll Accounting 2017, by Landin/Schirmer (3rd Edition)

Connect Student User Guide

PURPOSE:

This guide is meant to help students navigate and work through the Appendix A Payroll Project for Wayland Custom Woodworking in Connect. The project consists of two parts: Part 1 has students prepare of the sample employee’s onboarding forms (W4 and I9) and payroll for the entire 4th quarter for Wayland. Part 2 has students prepare the quarter and year-end federal and state tax forms for Wayland using the payroll information gathered in Part 1.

Before You Begin

NOTE: Your instructor may decide to not assign certain parts of the project at their discretion. If this is the case for your assignment, certain elements of this guide will not be applicable to you.

Before you move into the requirements of the project, take some time to familiarize yourself with the given information in the very first section of the project, which will provide you with the details and information needed to complete the project.

The given information includes:

• Details on Wayland Custom Woodworking (WCW), including its address, EIN, and phone number;

• Tax rates and links to both federal and state (Utah) withholding tax tables;

• WCW’s Balance Sheet as of 9/30/2016.

• Employee marital status, salary information, and voluntary deduction information.

You will need to refer to this information as you work through each part of the project. Specific information for each stage and requirement of the project will be given in each step as appropriate.

Payroll Project - Part 1

Part 1 of the project consists of students preparing the W4 and I9 in for the example student employee (named Student F Success) to start their company file in Requirement 1, as well as the preparation of Wayland’s payroll for the six pay periods in the 4th quarter of 2016 in Requirement 2. If your instructor has decided to not include the W4 and I9 in your Connect assignment, then you will begin with the pay periods.

Each pay period, with the exception of December 31 (the last of the year), consists of the following parts:

• A table for determining the gross pay for each employee (6 in total) for that period;

• A Payroll Register;

• Employee Earnings Record forms (EERF) for each employee;

• A set of General Journal entries to record the effects of the period’s payroll;

• A General Ledger for the posting of the journal entries to the individual ledger accounts that have been affected.

In each Project part, cells highlighted in yellow are input boxes or dropdown cells. Enter your answers in the appropriate input boxes for each part as you move through the project.

Yellow Shading for Input Boxes/Dropdown Cells

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To navigate between the requirements, go to the bottom of the page and note the buttons that appears, which are shown in the screenshot below. To move to the next requirement, select the box showing 1 and 2 below or select the blue checkered box, which will show both parts. DO NOT select “Score answer” or the “Submit” button at the top of the page until you are ready to submit your assignment for grading.

Requirement Navigation (Payroll Project Part 1)

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If you cannot complete your assignment in one sitting, ensure to select the “Save & Exit” button at the top of the screen to save the work that you have done so far.

October 15 Payroll (1st pay period of the 4th quarter):

Beginning with the Employee Gross Pay table, you will first want to compute an hourly rate for each of the six employees. Information for each employee relative to payroll can be found in the project information for Part 1 – for the Gross Pay table, pay particular attention to the yearly salary for each employee as well as whether or not they are considered an exempt or nonexempt employee, but other information for the employee, such as their marital status, will be used in completing the Payroll Register.

Example of Employee Information:

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For the October 15 pay period, you need to compute not only each employee’s gross pay (period payment before any deductions or taxes), but also their hourly rate based on their salary.

To compute the hourly rate, you will want to take their yearly salary and divide it by 2,080 (52 weeks per year x 40 hours worked per week). After dividing this number, round the result to 5 decimal places, and input the rate in the appropriate input box in the “Hourly rate” column for each employee.

To compute the period gross pay, you will need to take a different approach depending on whether or not each employee is considered exempt or nonexempt. For exempt employees, period gross pay is at the same level regardless of whether or not they work an excess of 80 or 88 hours, (depending on what the normal level is for a given pay period) as they are exempt from receiving overtime pay. For nonexempt employees, overtime pay can be earned if they exceed the normal hours for a given pay period, and hours over the normal threshold should be computed at their hourly rate times 1.5.

Putting this in an example, let’s compute the October 15 hourly rate and gross pay for employees Anthony Chinson and Stevon Varden. A screenshot of the results of these calculations can be found on the next page.

• Anthony Chinson is an exempt employee that earns a salary of $24,000 per year, plus commission on sales. For all pay periods in this project, Chinson’s commission is given to you, but to compute his regular pay for the period, you will first start by computing his hourly rate by taking $24,000 and dividing it by 2,080, which gives you $11.53846 when rounded to 5 decimal places. To determine the regular pay for Chinson, remember that he is an exempt employee, thus he receives the same pay per period regardless of the number of hours worked. Thus, for regular pay, you will take his yearly salary and divide it by 24, which is the number of pay periods in a year for an employee that is paid semimonthly. Doing so (24,000 / 24) will give you $1,000 for Chinson’s regular, non-commission pay for the October 15 pay period.

• Stevon Varden is a nonexempt employee that earns a salary of $42,000 per year. As he is a nonexempt employee, Varden will receive regular pay based on his hourly rate times the normal hours for the period, but will also receive overtime at a rate of 1.5 times his hourly rate against any hours considered overtime. First, start by computing Varden’s hourly rate, which is $20.19231 ($42,000 / 2,080) when rounded to 5 decimal places. For October 15, 80 hours is considered normal, but Varden worked 88 hours during this period, so you will first take Varden’s hourly rate times 80 hours, which will give you $1,615.38 when rounded to 2 decimal places. Then, take his hourly rate and multiply it by 1.5, which will give you $30.28847 when rounded to 5 decimal places, and multiply this by the 8 hours of overtime, which will give you $242.31 when rounded to 2 decimal places.

Example of Hourly Rate and Regular/Overtime Pay Calculation for October 15:

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For additional step-by-step instructions for this process, please view the following video.

Moving on past the Employee Gross Pay table, complete the Payroll Register for this pay period using the gross pay information that you just calculated, and use the other information is given in the project information at the very beginning, such as employee 401(k) percentages and the tax tables for both federal and Utah withholding tax.

After you have completed the Payroll Register, the information that you have entered previously will be automatically populated on the EERF for each employee. For the October 15 pay period, you do not need to enter any additional information on the EERFs for each employee, but pay close attention to the amounts in the “Current YTD” rows for both sections of each EERF, as you will carrying these amounts through to the next pay period.

After reviewing the EERFs, complete the General Journal entries and post them to the General Ledger accounts, taking care to enter each transaction in the order that they were journalized (note the date of each transaction in the General Journal for reference). You will need to enter the beginning balance of the Cash account, but no other account in the ledger has a beginning balance at this time. The ending balances for each ledger account will be used in the following pay period, much like with the EERFs.

October 31 to December 15 Payroll (2nd to 5th pay periods of the 4th quarter):

For each pay period after October 15, you will not have to recalculate each employee’s hourly rate on the Employee Gross Pay table – ensure to use the amount shown, which should be the rate that you computed for October 15. Determine the regular and overtime pay for each employee based on their exemption status using the methods described earlier.

As you work through each pay period, you will note that the November 30 pay period shows that employees have paid holidays. When paid holidays occur, ensure to distribute pay to the “Holiday” column of the Gross Pay table for the amount of hours that are stated as being holidays, and the rest in either the “Regular” or “Overtime” columns as appropriate.

For Nonexempt employees, you will simply take their hourly rate and multiply it by the holiday hours to determine this amount, but for Exempt employees, distribute the holiday pay by taking each employee’s regular period pay and multiplying it by the percentage of their time that is considered holiday, and using the remaining percentage to determine the period’s regular pay.

For example, we have already established that Anthony Chinson’s regular period pay (not counting his commission) is $1,000. However, as the November 30 pay period has 88 hours as the normal hour total, with 16 of those hours considered holiday time, you would take 16 and divide it by 88, and multiply the result by $1,000, which would give you $181.82 for holiday pay when rounded to 2 decimal places. Conversely, to calculate the rest of the regular pay for this period, take 72 and divide it by 88, and multiply the result by $1,000, which would give you $818.18 when rounding to two decimal places. Both of these amounts combined together will give you $1,000, which is Chinson’s normal semimonthly period plete the Payroll Register for each pay period, which will again populate the current period’s information onto the corresponding employee EERFs, but you will also need to enter in the prior period’s ending information for each employee to recompute the new “Current YTD” amounts for the new pay period. The prior pay period amounts should be accessed from the last EERF and added to the corresponding input boxes to the “Prior Period YTD” rows in both sections of the new EERFs.

As an example, for the October 15 pay period, we previously determined that Anthony Chinson’s regular pay was $1,000 for this period, which was a standard 80 hour work period. When reviewing the EERF for Chinson for October 15, note that the amounts for hours worked and regular pay are appearing on the “Current YTD” row (see below), meaning that these amounts represented the total balances of both hours worked and regular pay for the year at that point in time.

Chinson Current YTD Info from October 15 EERF:

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To carry these amounts to Chinson’s EERF for the October 31 pay period, simply reference the EERF for October 15 and input them to the appropriate input boxes on the rows with “Prior Period YTD” (again, see below). Consider taking a screenshot of the October 15 EERF for ease in carrying these amounts forward. After inputting these prior period amounts, they will be added to the October 31 amounts, which will be added together as the new YTD amounts.

Chinson Prior Period YTD Info Added to October 31 EERF:

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For additional step-by-step instructions for this process, please view the following video.

As you move into later pay periods, you will continue to add in the prior period’s total YTD amounts as of the prior period, rather than having to add each period’s amounts together individually. What this means is that for the November 15 pay period EERFs, you will add in the amounts that appear in the “Current YTD” rows from just the October 31 pay period, as the October 31 amounts represent the YTD totals from both the October 15 and October 31 pay periods.

After completing and reviewing the EERFs, you will again complete the General Journal entries for the current pay period and post them to the General Ledger accounts, taking care to enter each transaction in the order that they were journalized (note the date of each transaction in the General Journal for reference). For each pay period after October 15, you must also add in the prior period’s ending balance to the “Ending account balance from the prior period” rows for each ledger account as needed. As is the case with the EERFs, the prior ending balances for each ledger account will be factored in to the current period posting to compute the new ending balance.

For example, let’s assume that the ending balance for the Cash account was $1,000,000.00 after the October 15 pay period. For the October 31 pay period, this amount should be entered into the input box for the “Ending account balance from the prior period”, such as in the screenshot below. If we further assume that two transactions occurred for the October 31 pay period that resulted in credits to the Cash account of $5,000 and $3,000 respectively, posting both of these transactions to the Cash ledger account will recalculate the ending balance of Cash for the October 31 pay period as $992,000.00. This amount would then be carried forward to the November 15 pay period, and so on.

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For additional step-by-step instructions for this process, please view the following video.

December 31 Payroll (6th and last pay period of the 4th quarter):

The December 31 pay period will require you to complete an Employee Gross Pay table along with a Payroll Register, but there are no EERFs for this pay period, as the accrued payroll will not be disbursed to employees until January 3, 2017 of the following year. Similar to the November 30 pay period, the December 31 has paid holidays. Ensure to distribute earnings to the Holiday Pay column using the methods described earlier in this document and in the video.

Once the Payroll Register has been completed, complete the General Journal entries and post them to the General Ledger accounts, taking care to enter each transaction in the order that they were journalized (note the date of each transaction in the General Journal for reference). As was the case with the previous pay periods, ensure to carry the prior period ending balances for each ledger account to the December 31 ledger before posting the current period’s transactions.

After completing the General Ledger for December 31, you have completed Part 1 of the Payroll Project. Take some time to look over each requirement for Part 1 to ensure that all data has been entered, and then submit your assignment.

Payroll Project - Part 2

Part 2 of the Payroll Project consists of completing a set of tax forms for Wayland for both the end of the quarter and end of the year. These forms include:

• U.S. Form 941

• U.S. Form 940

• Utah Form TC-941

• Utah Form 33H

• Form W-2s for all 6 employees

• Form W-3 for WCW

In order to successfully complete each form, you will need to use the payroll information for Wayland’s 4th quarter that you prepared and submitted for Part 1 of the project. In particular, the EERFs for each employee for the December 15 pay period and the General Ledger tabs for all pay periods will provide you with the amounts needed for each form, but you must also refer to the given information for Wayland and its employees, such as addresses and social security numbers, for the forms.

To navigate between the requirements, go to the bottom of the page and note the buttons that appears, which are shown in the screenshot below. To move to the next requirement, select the box showing 1, 2, 3, and 4 below or select the blue checkered box, which will show all 4 parts. DO NOT select “Score answer” or the “Submit” button at the top of the page until you are ready to submit your assignment for grading.

Requirement Navigation (Payroll Project Part 2)

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If you cannot complete your assignment in one sitting, ensure to select the “Save & Exit” button at the top of the screen to save the work that you have done so far.

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