Kap 1 6th Workbook Te CH 11

Chapter 11
PAYROLL
LEARNING OBJECTIVES
LO 11-1 Describe payroll accounting LO 11-5 Prepare payroll registers
LO 11-2 Calculate gross pay LO 11-6 Describe payroll controls
LO 11-3 Describe payroll deductions and employer’s

Appendix 11A
contributions
LO 11-7 Calculate statutory deductions
LO 11-4 Record payroll liabilities, employer’s
contributions and payroll payments
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Assessment Questions
AS-1 LO 11-1
Payroll accounting is important to any business that has employees. What are the requirements and obligations of
employees, government and the employer where payroll is concerned?
Employees: Expect to be paid fairly and receive a timely and accurate paycheque
Government: Provides legislation outlining employment standards that employers are obligated to follow, including
minimum rates of pay, rate for vacation pay and required compensation for terminated employees
Employers: Have a requirement to pay employees the amounts owed, to remit amounts deducted from employees
to government and other organizations and to report their payroll tax expense based on gross pay
AS-2 LO 11-1, 2
Define gross pay. How is it calculated?
Gross pay is the amount earned by an employee before any statutory and voluntary deductions. It is either based
on a set amount per pay period or based on hours worked multiplied by an hourly rate.
AS-3 LO 11-1, 2
What is net pay? How is it calculated?

Net pay is the amount owed to an employee after deductions have been made; it is the take-home pay. It is
calculated by subtracting the deductions from gross pay, including contributions into the Canada Pension Plan,
Employment Insurance and income tax, as well as other deductions.
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Chapter 11 Payroll
AS-4 LO 11-3
Define statutory deductions, and identify three statutory deductions in Canada.

Statutory deductions are amounts that businesses must withhold from an employee’s gross pay. Three statutory
deductions in Canada are Canada Pension Plan (CPP), Employment Insurance (EI) and income tax.
AS-5 LO 11-3
Define voluntary deductions, and provide three examples of voluntary deductions.

Voluntary deductions are amounts that businesses withhold from an employee’s gross pay with the employee’s
permission. Examples of voluntary deductions can include union dues, charitable donations, professional fees,
uniform allowances, pensions or medical coverage.
AS-6 LO 11-3
True or False: There is no maximum amount for the Canada Pension Plan (CPP) deductions, so employees will
contribute to the CPP no matter how much they earn in a year.
False. The CPP has a maximum amount each year. Once an employee reaches that amount, they no longer
contribute to the CPP for the rest of the year.
AS-7 LO 11-3
How much must an employer contribute to CPP on behalf of its employees?

The employer must match (pay 100%) the amount of CPP withheld from an employee’s pay.
AS-8 LO 11-3
Is there any limitation to the amount of Employment Insurance (EI) that will be deducted from an employee’s pay
(i.e., age limit, exemption amounts or maximum deductions)?
There is no age limit or exemption amount for EI. However, there is a yearly maximum that employees will have
deducted from their pay.
AS-9 LO 11-3
How much must the employer contribute to EI on behalf of its employees?

The employer must pay 140% of the amount of EI withheld from an employee’s pay.
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Payroll Chapter 11
AS-10 LO 11-3
True or False: The total cost of paying an employee is equal to the amount of gross pay the employee earns.
False. The total cost of paying an employee includes the gross pay, plus other statutory and voluntary payments
that the employer makes.
AS-11 LO 11-5
When would a company use a payroll register?

A payroll register is used when there are many employees that must be paid.
AS-12 LO 11-6
What type of information is recorded in a payroll record and what is the information used for?
A payroll record contains personal information about an employee, including their gross pay and all their
deductions. The gross pay and deduction information is used at the end of the year to create tax forms (T4).
AS-13 LO 11-6
Identify two payroll controls and briefly explain them.

The person hiring should not be same person paying the employee. This ensures that the employee actually exists
and is not made up.
Management should ensure that employees actually work the hours they claim. This can be monitored by using a
time clock to monitor start and stop times.
Proper authorization should be required for pay increases.
To avoid fraud, the person creating cheques should not be the same person signing the cheques.
An imprest bank account can track payroll cheques and help prevent theft through payroll.
AS-14 LO 11-6
How does an imprest bank account help control payroll?

An imprest bank account is a separate account that only handles payroll cheques. Any attempt of theft through
payroll will be caught because there is only enough cash in the imprest account to cover the payroll cheques.
AS-15 LO 11-3, 7
Is there any limitation to the amount of income tax that will be deducted from an employee’s pay (for example,
age limit, exemption amounts or maximum amounts)?
There are no age limits or maximum amounts that can be deducted for income taxes. Employees are given tax
credits which exempt a portion of their earnings from income tax.
613
Chapter 11 Payroll
AS-16 LO 11-7 (Appendix 11A)
How much is the annual CPP exemption amount, and what does it mean for employees?
The CPP exemption amount is $3,500 for 2021. It means that employees will not pay any CPP on the first $3,500
they earn each year although the exemption amount is spread evenly throughout the year.
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Payroll Chapter 11
Practice Questions
PR-1 LO 11-2
Susan worked 38 hours for the week ended October 8, 2021, and earns $15.60 per hour. Calculate the gross pay
for Susan.
Gross pay = 38 hours × $15.60/hour = $592.80
PR-2 LO 11-2
Linda worked 43 hours for the week ended July 16, 2021. Any hours worked over 40 hours qualify as overtime,
paid at time-and-a-half. Linda earns $16.50 per hour. Calculate her gross pay for the week.
Regular pay 40 hours × $16.50/hour = $660.00

Overtime pay 3 hours × ($16.50 × 1.5) = $74.25
Gross pay = $734.25
PR-3 LO 11-2
Jesse earns a salary of $65,000 per year. What is Jesse’s weekly salary?
Weekly salary = $65,000 annual salary ÷ 52 weeks = $1,250
PR-4 LO 11-4
Kim is paid a salary of $1,100 per week, with the following deductions:
• Canada Pension Plan contribution: $56.28
• Employment Insurance contribution: $17.38
• Income taxes: $286.00
Calculate Kim’s net pay.
Net Pay = $1,100 – ($56.28 + $17.38 + $286.00) = $740.34
PR-5 LO 11-4
Patricia earned $1,035.20 for the week. She has the following deductions:
• Canada Pension Plan contribution: $52.75
• Employment Insurance contribution: $16.36
• Union dues: $35.00
• Health care plan: $103.52
Calculate Patricia’s net pay.
Net Pay = $1,035.20 − ($52.75 + $16.36 + $258.80 + $35.00 + $103.52) = $568.77
615
Chapter 11 Payroll
PR-6 LO 11-4
Aylmer Inc. has five employees who are paid weekly. The following information has been gathered for the payroll
period ending July 16, 2021:
• Gross pay: $3,868.50
• CPP: $192.49
• EI: $61.12
• Union dues: $200.00
Prepare the journal entry to record the weekly pay for Aylmer Inc., if payments are made later.
JOURNAL
Date Account Title and Description Debit Credit
2021
Jul 16 Salaries Expense 3,868.50
CPP Payable 192.49
EI Payable 61.12
Income Tax Payable 967.00
Union Dues Payable 200.00
Salaries Payable 2,447.89
To record employee payroll
PR-7 LO 11-4
Soliz Enterprises has 6 employees. Soliz accrues vacation pay each month based on employee wages. All
employees earn two weeks of vacation pay so the vacation accrual is 4% of gross wages. Gross wages for the
month of May 2021 are $26,350. Prepare the journal entry to accrue vacation pay for May 2021.
JOURNAL
2021
May 31 Vacation Pay Expense 1,054
Vacation Pay Payable 1,054
To accrue vacation pay
PR-8 LO 11-4
Chan Marketing Inc has one employee, who is paid monthly. For the month of March 2021, the employee had
$235.08 deducted for Canada Pension Plan, $81.63 for Employment Insurance, and $1,261.68 for income taxes.
Calculate the employer contributions that Chan Marketing would incur for March 2021. Recall that employers
match CPP deductions and contribute 140% toward EI.
Employer CPP contribution = $235.08

Employer EI contribution = 140% × $81.63 = $114.28
The employer does not make a contribution for income taxes.
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Payroll Chapter 11
PR-9 LO 11-4
David Consulting has five employees, who are paid monthly. For the month of June 2021, gross wages totalled $20,000,
with the following deductions and contributions.
Employee Deductions Employer Contributions

CPP 1,010.52 1,010.52
EI 316.00 442.40
Income Taxes 5,000.00
Prepare the journal entry to record the employee benefits expense for the month of June.
JOURNAL
2021
Jun 30 Employee Benefits Expense 1,452.92
CPP Payable 1,010.52
EI Payable 442.40
To record employer payroll expenses
PR-10 LO 11-4
Wacky Webmasters has 10 employees, who are paid weekly. After the final payroll for April 2021 was processed,
total gross wages for the month were $59,000, with the following employee deductions and employer
contributions.
Total Deductions and

Contributions
CPP $3,068.79 $3,068.79 $6,137.58
EI 932.20 1,305.08 2,237.28
Income Taxes 14,750.00 — 14,750.00
Total $18,750.99 $4,373.87 $23,124.86
Based on the total payroll for April 2021, prepare the journal entry to record the amount to be remitted to Canada
Revenue Agency, due May 15, 2021.
JOURNAL
2021
May 15 CPP Payable 6,137.58
EI Payable 2,237.28
Income Tax Payable 14,750.00
Cash 23,124.86
To remit deductions to the CRA
617
Chapter 11 Payroll
PR-11 LO 11-4
Flowers in Bloom has 20 employees, who are paid weekly. For the week ending June 18, 2021, gross wages were
$62,500, with the following employee deductions and employer contributions.

CPP $3,332.89 $3,332.89
EI $987.50 $1,382.50
Income Taxes $15,625.00
Prepare the appropriate entries relating to the week ending June 18, 2021, if employees are paid that day.
JOURNAL
2021
Jun 18 Salaries Expense 62,500.00
EI Payable 987.50
Income Tax Payable 15,625.00
Cash 42,554.61
To record employee payroll
Jun 18 Employee Benefits Expense 4,715.39

EI Payable 1,382.50
PR-12 LO 11-7 (Appendix 11A)
Amanda is a salaried employee and is paid weekly. In 2021, Amanda’s annual salary was $42,000. How much CPP
would be deducted from Amanda’s weekly paycheque in 2021? The CPP rate is 5.45%.
Annual salary $42,000.00

Less: Exemption 3,500.00
Subject to CPP 38,500.00
Divided by: Weekly pay periods 52
Weekly amount subject to CPP $740.38
Multiplied by: CPP rate 5.45%
Weekly CPP deduction $40.35
Shawn is an hourly employee and is paid bi-weekly. For the pay period ended August 6, 2021, Shawn earned
$1,440.00. How much EI would be deducted from Shawn’s bi-weekly pay cheque in 2021? The EI rate is 1.58%.
Wage for the period $1,440.00

Multiplied by: EI rate 1.58%
EI deduction $22.75
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Payroll Chapter 11
Big Construction Company has 30 employees. Big Construction has to remit workers’ compensation monthly, at a
rate of $3.80 per $100 of payroll. For the month of April 2021, gross wages were $26,455. Calculate the amount of
workers’ compensation to be paid for the month of April 2021.
Workers’ Compensation Payment = Gross Pay × (Rate ÷ 100)

= $26,455 × ($3.80 ÷ 100) = $1,005.29
PR-15 LO 11-4, 7 (Appendix 11A)
Watery Tile Company has 27 employees. Watery has to remit workers’ compensation payments monthly, at a rate
of $4.55 per $100 of payroll. For the month of March 2021, gross wages were $32,659. Prepare the journal entry to
record workers’ compensation expense for the month.
JOURNAL
2021
Mar 31 Workers’ Compensation Expense 1,485.98
Workers’ Compensation Payable 1,485.98
To record workers’ compensation expense
619
Chapter 11 Payroll
Application Questions Group A

AP-1A LO 11-2
The records of Dipsum Soft Drinks show the following figures. Calculate the missing amounts.
Employee Earnings
Salaries for the month 6,700
Overtime Pay 2,200
Total Gross Pay 8,900
Deductions and Net Pay
Withheld Statutory Deductions 3,000
Charitable Contributions 100
Medical Insurance 150
Total Deductions 3,250
Net Pay 5,650
AP-2A LO 11-2
Phineas Company has two employees who are paid on an hourly basis every week. Payroll information for the
week ending June 28, 2021, is listed below. Overtime is paid on hours over 44 hours per week.
Employee Hours Hourly Rate Income Tax CPP EI

H. Farnsworth 37 $16.25 $120.25 $29.10 $9.50
P. Fry 42 19.00 155.80 39.82 12.61
Calculate the gross pay and net pay for each employee.
Employee Gross Pay Net Pay

H. Farnsworth 601.25 442.40
P. Fry 798.00 589.77
AP-3A LO 11-2
Jonathan is paid $20.25 per hour and is paid weekly. He is paid vacation pay of 4% each pay period. For the week
ended September 10, 2021, he worked 36 hours. Calculate Jonathan’s gross pay.
Gross pay (before vacation pay) = 36 hours × $20.25 = $729.00

Vacation pay = $729.00 × 4% = $29.16
Gross pay (including vacation pay) = $729.00 + $29.16 = $758.16
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Payroll Chapter 11
AP-4A LO 11-3
Identify the following payroll deductions and expenses as statutory or voluntary, based on legislation.
Description Statutory Voluntary

Income taxes X
Dental benefits X
Union dues X
Savings bond purchase X
Uniform allowance X
Tuition X
Canada Pension Plan X
Prescription coverage X
Retirement deduction X
Employment Insurance X
Long-term disability X
Professional dues X
Charitable donations X
Tools and safety apparel X
AP-5A LO 11-2, 3
Arnet Company showed the following information relating to employees’ salaries for the month of February 2021:
Gross wages $7,500

Income taxes 739
Canada Pension Plan contributions 392.85
Employment Insurance contributions 118.50
Note: The company matches 100% of employees’ CPP and 140% of employees’ EI.
Required
a) Calculate the company’s total expense.

Gross wages $7,500.00
Canada Pension Plan—company’s share 392.85
Employment Insurance—company’s share 165.90
Total expense 8,058.75
b) Calculate the employees’ net pay.

Net pay = $7,500 – ($739 + $392.85 + $118.50) = $6,249.65
AP-6A LO 11-2, 3, 4
An employer has calculated the following amounts for an employee during the last week of March 2021.
Gross wages $1,500

Income taxes 300
Canada Pension Plan 78.08
Employment Insurance 23.70
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Chapter 11 Payroll
Required
a) Calculate the employee’s net pay, assuming an income tax rate of 20% is applied.
Net Pay = $1,500 − 300 − 78.08 − 23.70 = 1,098.22
b) Assuming the employer’s contribution is 100% for Canada Pension Plan and 140% for Employment Insurance,
what is the employer’s total expense?
CPP = $78.08 EI = $23.70 × 1.4 = $33.18

Total expenses = $1,500 + 78.08 + 33.18 = $1,611.26
c) Prepare the journal entries to record payroll for the employee and record the employer’s contribution.
JOURNAL
Date Account Title and Explanation Debit Credit
2021
Mar 31 Salaries Expense 1,500.00
CPP Payable 78.08
EI Payable 23.70
Cash 1,098.22
To record payroll

Mar 31 Employee Benefits Expense 111.26
CPP Payable 78.08
EI Payable 33.18
To record additional employer expenses

AP-7A LO 11-2, 3, 4
An employee had $21,500 in gross earnings up to September 20, 2021. She has the following information for her
pay for the week ending September 27, 2021. Her employer contributes 100% toward CPP and 140% toward EI.
Vacation pay is accrued at 4% of gross pay. Workers’ Compensation is 1% of gross pay.
Hours 38
Hourly Rate $16.50
Income Tax $125.40
Canada Pension Plan $30.50
Employment Insurance $9.91
Union Dues $20.00
Charitable Donations $5.00
622
Payroll Chapter 11
Required
a) Prepare the journal entry to record the payroll entry for the employee. The employee will be paid immediately.
JOURNAL
2021
Sep 27 Salaries and Wages Expense 627.00
CPP Payable 30.50
EI Payable 9.91
Charitable Donations Payable 5.00
Cash 436.19
To record payroll for employee
b) Prepare the journal entry to record accrued vacation pay.
JOURNAL
2021
Sep 27 Vacation Pay Expense 25.08
Vacation Pay Payable 25.08

c) Prepare the journal entry to record the employer’s payroll expense.
JOURNAL
2021
Sep 27 Employee Benefits Expense 50.64
CPP Payable 30.50
EI Payable 13.87
Workers’ Compensation Payable 6.27
d) Prepare the journal entry on October 10, 2021, to record the cash payment for statutory amounts owed to the
CRA.
JOURNAL
2021
Oct 10 CPP Payable 61.00
EI Payable 23.78
Cash 210.18
To record payment to the government

623
Chapter 11 Payroll
e) Prepare the journal entry on October 20, 2021, to record the cash payment to Workers’ Compensation.
JOURNAL
2021
Oct 20 Workers’ Compensation Payable 6.27
Cash 6.27
To record payment for workers’ compensation
AP-8A LO 11-2, 3, 4
Sampson Company has three employees who are paid on an hourly basis, plus time and a half for hours in excess
of 44 hours per week. Payroll information for the week ending August 16, 2021, is listed below.
Hourly Income Union

Employee Hours CPP EI
Rate Tax Dues
A. Knopf 41 $15.25 $137.55 $30.41 $9.88 $10.00
B. Penguin 48 16.00 176.00 39.93 12.64 10.00
D. House 38 15.75 131.67 28.95 9.46 10.00
Total $445.22 $99.29 $31.98 $30.00
Required
a) Calculate the gross pay for each employee and the amount the employer will have to pay for CPP and EI.
Employee Gross Pay Employer CPP Employer EI

A. Knopf 625.25 30.41 13.83
B. Penguin 800.00 39.93 17.70
D. House 598.50 28.95 13.24
Total $2,023.75 $99.29 $44.77
b) Prepare the journal entries for the August 14 payroll and the employer’s portion of payroll. Employees will not
be paid until the next week.
JOURNAL
2021
Aug 16 Salaries Expense 2,023.75
CPP Payable 99.29
EI Payable 31.98
To record payroll

Aug 16 Employee Benefits Expense 144.06
CPP Payable 99.29
EI Payable 44.77
To record employer's portion of payroll
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Payroll Chapter 11
c) Record the payment of the statutory deductions to the CRA on August 31, 2021.
JOURNAL
2021
Aug 31 Income Tax Payable 445.22
CPP Payable 198.58
EI Payable 76.75
Cash 720.55
To pay amount owing to the government
AP-9A LO 11-3, 4
Bertrand Company has calculated the gross pay of one of its employees to be $2,500 semi-monthly. The company
must pay 4% of the gross pay as vacation pay and 0.5% for Workers’ Compensation. The pay date is August 15,
2021.
Required
a) Calculate and prepare the journal entry for accrued vacation pay.
JOURNAL
2021
Aug 15 Vacation Pay Expense 100.00
b) Calculate and prepare the journal entry for Workers’ Compensation.
JOURNAL
2021
To record workers' compensation
625
Chapter 11 Payroll
AP-10A LO 11-2, 3, 4, 5
The payroll records of Russon Corporation’s district office provided the following information for the weekly pay
period ended December 27, 2021.
Employee Hours Hourly Rate Income Tax CPP EI Union Dues

Clay York 42 $16.00 $134.00 $32.96 $10.62 $10.00
Karen Cooper 46 15.00 141.00 34.75 11.14 10.00
Stephen James 48 17.00 177.00 42.66 13.43 10.00
Jessie Moore 40 18.00 144.00 35.57 11.38 10.00
Note
All employees are paid 1.5 times their hourly wage for hours worked in excess of 44 hours per week.
The company contributes 100% for its share of CPP and 140% of EI.
Required
a) Calculate gross and net pay for each employee.
Gross Income Union Employer's Employer's

Employee CPP EI Net Pay
Pay Tax Dues Cost: CPP Cost: EI
Clay York $672.00 $134.00 $32.96 $10.62 $10.00 $484.42 $32.96 $14.87
Karen Cooper 705.00 141.00 34.75 11.14 10.00 508.11 34.75 15.60
Stephen James 850.00 177.00 42.66 13.43 10.00 606.91 42.66 18.80
Jessie Moore 720.00 144.00 35.57 11.38 10.00 519.05 35.57 15.93
Total $2,947.00 $596.00 $145.94 $46.57 $40.00 $2,118.49 $145.94 $65.20
b) Prepare the payroll journal entries for December 27, 2021.
JOURNAL
2021
Dec 27 Salaries and Wages Expense 2,947.00
CPP Payable 145.94
EI Payable 46.57
Salaries and Wages Payable 2,118.49
To record payroll
Dec 27 Employees Benefits Expense 211.14

CPP Payable 145.94
EI Payable 65.20
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Payroll Chapter 11
c) Prepare a journal entry to record cash payment of the payroll liabilities due to the CRA on January 15, 2022.
JOURNAL
2022
Jan 15 Income Tax Payable 596.00
CPP Payable 291.88
EI Payable 111.77
Cash 999.65
AP-11A LO 11-6
Payroll is an area of a business that requires adequate internal controls to ensure that employees are paid properly
on a timely basis and that abuse of business resources has not occurred in the process. Discuss five internal
controls specifically related to payroll.
1. There should be a proper segregation of duties between the person hiring and the person paying the
employees. New employees should be required to fill out forms containing personal information such as
their name, address, emergency contact and social insurance number. This information should be given to
the person who pays the employees.
2. The hours worked by employees should be monitored to ensure they are the same as reported by the
employee. Swipe or punch card systems are commonly used for this purpose.
3. Employee pay increases and terminations should be monitored by management to ensure they have been
properly authorized.
4. Where manual cheques are used, the person who creates the cheque should not be the same person who
signs it.
5. A separate payroll bank account, also known as an imprest bank account, should be used where possible,
as this allows for better control of making payments to employees. An amount is transferred from the
main bank account to cover the net pay being paid to employees. Only payroll cheques are cashed on this
account, which makes reconciliation easier. Also, since only the required amount of cash is available in this
account, there is less opportunity for theft or fraud to occur.
AP-12A LO 11-2, 7 (Appendix 11A)
Beverly earns a salary of $52,800 per year and is paid semi-monthly. Assuming her income tax rate is 21%,
calculate her net pay for each semi-monthly pay period in 2021.
Gross Pay 2,200.00

CPP 111.95
EI 34.76
Income Tax 462.00
Net Pay 1,591.29
627
Chapter 11 Payroll
AP-13A LO 11-7 (Appendix 11A)
Annual salary information for the three employees of Trio Consulting is as follows:
Carly Reynolds: $126,500

Shannon Donaldson: $105,600
Cameron Jagger: $45,000
Employees are paid weekly, and their only deductions are CPP, EI and income taxes at the following rates:
• CPP: 5.45%, $3,500 basic personal exemption; maximum pensionable earnings of $61,600
• EI: 1.58%; maximum insurable earnings of $56,300
• Income taxes: 32%
Calculate the net pay for the week ending October 22, 2021 (week 42). Space is provided below to show your
calculations.
Weekly Total
Employee CPP EI Income Tax Net Pay
Earnings Deductions
Carly Reynolds $2,432.69 $0 $0 $778.46 $778.46 $1,654.23
Shannon Donaldson 2,030.77 0 0 649.85 649.85 1,380.92
Cameron Jagger 865.38 43.50 13.67 276.92 334.09 531.29
October 22 is week 42. Year-to-date earnings:
Carly Reynolds: $2,432.60 × 42 = $102,173.08 (maximum limit achieved for CPP and EI)
Shannon Donaldson: $2,030.77 × 42 = $85,292.31 (maximum limit achieved for CPP and EI)
Cameron Jagger: $865.38 × 42 = $36,346.15 (CPP and EI deductions to be calculated; shown below)
CPP = ($865.38 earnings − $67.30 prorated weekly exemption) × 5.45% = $43.50
EI = $865.38 × 1.58% = $13.67
AP-14A LO 11-7 (Appendix 11A)
Susan’s Dress Shoppe has two employees who earn commission based on sales. The following information is
available for the weekly pay period ended March 13, 2021.
Hourly Commission Hours

Employee Sales
Wage (% of Sales) Worked
Linda Jackson $16.50 2.25% 36.25 $10,540
Margaret McHenry $17.10 2.65% 38.50 $21,550
Assume a CPP rate of 5.45%, EI rate of 1.58% and tax rate of 25% on gross salary. Calculate the net pay for the
employees.
Hours Hourly Income Total

Employee Commission Gross Pay CPP EI Net Pay
Worked Rate Tax Deductions
Linda Jackson 36.25 $16.50 $237.15 $835.28 $41.85 $13.20 $208.82 $263.87 $571.41
Margaret McHenry 38.50 $17.10 $571.08 $1,229.43 $63.33 $19.42 $307.36 $390.11 $839.32
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Payroll Chapter 11
AP-15A LO 11-3, 4, 5, 7 (Appendix 11A)
Caroline Allison is an employee of Specialty Gift Store. Caroline is paid weekly, and information relating to the
current pay period (ending July 10, 2021) is as follows.
Hours worked: 43.25 hours

Hourly rate: $17.20
Vacation pay: 4.00% (paid weekly on gross pay)
Commission: 3.75% (on sales)
Sales: $8,652
Workers’ compensation rate: 1.00% (remitted quarterly)
CPP rate: 5.45%
EI rate: 1.58%
Income tax rate: 29.60%
Union dues: $12.35 (per pay)
Pension contribution: 3.50% (contributed by employee, based on gross wages)
Health care (paid by employer): $45.90 (paid each pay period)
Overtime is paid at time and one-half on hours worked over 40 hours.
Required
a) Calculate the net pay for Caroline.
Gross Pay:
Regular hours (40 hours × $17.20) $688.00
Overtime hours (3.25 hours × $25.80) 83.85
Commission ($8,652 × 3.75%) 324.45
Gross pay before vacation pay 1,096.30
Vacation pay ($1,096.30 × 4.00%) 43.85
Gross pay $1,140.15
Deductions:
CPP $58.47
EI ($1,140.15 × 1.58%) 18.01
Income taxes ($1,140.15 × 29.60%) 337.48
Union dues 12.35
Pension contribution ($1,140.15 × 3.5%) 39.91
Total deductions 466.22
Net pay $673.93
629
Chapter 11 Payroll
b) Prepare the related payroll entries for Caroline, assuming she is paid immediately on July 10.
JOURNAL
2021
Jul 10 Salaries Expense 1,140.15
CPP Payable 58.47
EI Payable 18.01
Pension Plan Payable 39.91
Cash 673.93
To record payroll

Jul 10 Employee Benefits Expense 140.98
CPP Payable 58.47
EI Payable 25.21
Health Care Payable 45.90

AP-16A LO 11-2, 3, 4, 5, 7 (Appendix 11A)
Tremolo Manufacturing has three employees who work on an hourly basis and are paid bi-weekly. The current CPP
rate is 5.45%, the current EI rate is 1.58%, and the appropriate income tax rate is 20%. Each employee contributes
a portion of their pay to the United Way. The employer pays the entire amount of the health care premium for the
employees. Assume the employer contributes 100% toward CPP and 140% toward EI. Payroll information for the
week ending August 23, 2021, is listed below.
Total Hourly United Health

Employee
Hours Rate Way Care
Sing Ing 80 $16.00 $5.00 $14.00
Roc N. Role 78 15.00 7.00 20.00
Hip Hopp 75 15.50 4.00 17.00
Required
Payroll Register
Deductions
Income United Total
Employee Gross CPP* EI Net Pay
Tax Way Deductions
Sing Ing $1,280.00 $256.00 $62.42 $20.22 $5.00 $343.64 $936.36
Roc N. Role 1,170.00 234.00 56.43 18.49 7.00 315.92 854.08
Hip Hopp 1,162.50 232.50 56.02 18.37 4.00 310.89 851.61
Total $3,612.50 $722.50 $174.87 $57.08 $16.00 $970.45 $2,642.05
*Remember to properly account for the $3,500 exemption
630
Payroll Chapter 11
b) Calculate the employer contributions.
Employer Contributions
CPP 174.87
EI 79.92
Health Care 51.00
c) Prepare the payroll journal entries for August 23, 2021, to record the salaries payable to the employees and
accrue the employer contributions.
JOURNAL
2021
Aug 23 Salaries Expense 3,612.50
CPP Payable 174.87
EI Payable 57.08
United Way Payable 16.00
To record payroll

CPP Payable 174.87
EI Payable 79.92

d) Prepare the entry to pay the employees on August 30, 2021.
JOURNAL
2021
Aug 30 Salaries Payable 2,642.05
Cash 2,642.05
To pay employees
e) Prepare the entries to pay the liabilities to the United Way and the health insurance company on August 31, 2021.
JOURNAL
2021
Aug 31 United Way Payable 16.00
Cash 16.00
To pay United Way liability

Aug 31 Health Care Payable 51.00
Cash 51.00
To pay health care liability

631
Chapter 11 Payroll
f ) Prepare the entry to pay the liabilities to the government on September 15, 2021.
JOURNAL
2021
Sep 15 Income Tax Payable 722.50
CPP Payable 349.74
EI Payable 137.00
Cash 1,209.24
632
Payroll Chapter 11
Application Questions Group B

AP-1B LO 11-2
Hurley Johnson works as a janitor in a hospital and earns $15.00 per hour. Johnson’s payroll deductions include
withheld income tax of 10% of total earnings, CPP of $121, EI amounting to $40, and a monthly deduction of $50
for a charitable contribution.
Calculate Hurley Johnson’s gross pay and net pay assuming he worked 168 hours during the month of June 2021.
Round to the nearest whole dollar.
Gross Pay (168 hours × $15.00) $2,520

Deductions:
Income Tax ($2,520 × 10%) $252
Canada Pension Plan 121
Employment Insurance 40
Charitable Contribution 50
$463
Net Pay $2,057
AP-2B LO 11-2
Sigma Five Consulting has two employees who are paid on an hourly basis every week. Payroll information for the
week ending July 26, 2021, is listed below. Overtime is paid on hours over 48 hours per week.

K. Bill 39 $22.50 $175.50 $44.16 $13.86
Q. Tarantino 43 24.00 204.00 52.58 16.31
Calculate the gross pay and net pay for each employee.
Employee Gross Pay Net Pay

K. Bill 877.50 643.98
Q. Tarantino 1,032.00 759.11
AP-3B LO 11-2
Amy is paid $18.00 per hour and is paid bi-weekly. She is paid vacation pay of 4% each pay period. For the two-
week period ended August 27, 2021, she worked 78 hours, with no overtime. Amy has the following deductions.

Employment Insurance 23.07
Income taxes 379.65
Union Dues 26.50
Health plan 146.00
633
Chapter 11 Payroll
Calculate Amy’s net pay.

Gross pay (before vacation pay) = 78 hours × $18.00 = $1,404.00
Vacation pay = $1,404.00 × 4% = $56.16
Gross pay (including vacation pay) = $1,404.00 + $56.16 = $1,460.16
Net pay = $1,460.16 – ($72.24 + $23.07 + $379.65 + $26.50 + $146.00) = $812.70
AP-4B LO 11-3
Your friend Shauna has just been hired by a local restaurant. She has been told that she must pay for a uniform, and
that the cost will be taken from her pay as a deduction. Shauna is wondering if this is considered to be a statutory
deduction, since it is required by the employer. She has asked you to explain the difference between statutory and
voluntary deductions and provide three examples of each. Which type of deduction is the uniform cost?
Statutory deductions are required by the government. The employer is required to deduct the amounts and then
remit to the government by the 15th of the month following the pay period. Examples of statutory deductions
include income tax, Canada Pension Plan and Employment Insurance premiums. Voluntary deductions include
things like pension plans, charitable donations and medical benefits such as health care and dental plans.
Although Shauna’s uniform cost is a requirement of being an employee at the restaurant, it is considered voluntary
in the sense that she would have been made aware of this when she accepted the terms of employment. It is not
required by the government, so it does not meet the definition of a statutory deduction.
AP-5B LO 11-2, 3
ABC Company showed the following information relating to employees’ salaries for the month of October 2021.
Gross wages $4,300

Income taxes 860
Canada Pension Plan contributions 218
Employment Insurance contributions 68
Note: The company matches 100% of employees’ CPP and 140% of employees’ EI.
Required
a) Calculate the company’s total expense.
Gross wages $4,300.00

Canada Pension Plan—company's share 218.00
Employment Insurance—company’s share 95.20
Total Expense $4,613.20
b) Calculate the employee’s net pay.
Gross pay $4,300

Income taxes 860
Net Pay 3,154
634
Payroll Chapter 11
AP-6B LO 11-2, 3, 4
An employer has calculated the following amounts for an employee during the last week of March 2021.
Gross wages $1,800
Income taxes 445
Workers’ Compensation 20
Required
a) Calculate the employee’s net pay.
Net Pay = $1,800 − 445 − 94 − 28 = $1,233
b) Assuming the employer’s contribution is 100% for CPP and 140% for EI, what is the employer’s total expense?
CPP = $88 EI = $28 × 1.4 = $39.20

Total expenses = $1,800 + 94 + 39.20 + 20 = $1,953.20
c) Prepare the journal entries to record payroll for the employee and record the employer’s contribution.
JOURNAL
2021
Mar 29 Salaries Expense 1,800.00
CPP Payable 94.00
EI Payable 28.00
Cash 1,233.00
To record payroll

Mar 29 Employee Benefits Expense 153.20
CPP Payable 94.00
EI Payable 39.20

AP-7B LO 11-2, 3, 4
An employee has the following information for his pay for the week ending April 26, 2021. His employer contributes
100% toward CPP and 140% toward EI. Vacation pay is accrued at 4% of gross pay. Workers’ Compensation is 0.8% of
gross pay. Any hours worked over 44 per week are paid overtime at 1.5 times the hourly rate. Income tax is deducted
at a rate of 25%.
Hours 48
Hourly Rate $18.00
Income Tax $225.00
Employment Insurance $14.22
635
Chapter 11 Payroll
Required
a) Calculate gross pay.

Regular pay = 44 × $18.00 = $792
Overtime pay = 4 × $18 x 1.5 = $108
Gross pay = $792 + $108 = $900
b) Prepare the journal entry to record the payroll entry for the employee. The employee will be paid immediately.
JOURNAL
2021
Apr 26 Salaries and Wages Expense 900.00
CPP Payable 45.38
EI Payable 14.22
Cash 615.40
To record payroll for employee
c) Prepare the journal entry to record accrued vacation pay.
JOURNAL
2021
Apr 26 Vacation Pay Expense 36.00

d) Prepare the journal entry to record the employer’s payroll expense.
JOURNAL
2021
Apr 26 Employee Benefits Expense 72.49
CPP Payable 45.38
EI Payable 19.91
636
Payroll Chapter 11
e) Prepare the journal entry on May 9, 2021, to record the cash payment for statutory amounts owed to the CRA.
JOURNAL
2021
May 9 CPP Payable 90.76
EI Payable 34.13
Cash 349.89
To record payment to the government

f ) Prepare the journal entry on May 15, 2021, to record the cash payment to Workers’ Compensation.
JOURNAL
2021
May 15 Workers’ Compensation Payable 7.20
Cash 7.20
To record payment for workers’ compensation
AP-8B LO 11-2, 3, 4
Ridell Company has two employees who are paid on an hourly basis, plus time and a half for hours in excess of 44
hours per week. Payroll information for the week ending May 31, 2021, is listed below.

D. Troi 38 $15.25 $115.90 $27.91 $9.16
W. Crusher 50 18.00 190.80 48.33 15.07
Required
a) Calculate the gross pay for each employee and the amount the employer will have to pay for CPP and EI.
Employee Gross Pay Employer CPP Employer EI

D. Troi 579.50 27.91 12.82
W. Crusher 954.00 48.33 21.10
Total $1,533.50 $76.24 $33.92
637
Chapter 11 Payroll
b) Prepare the journal entries for the May 31 payroll and the employer’s portion of payroll. Employees will not be
paid until the next week.
JOURNAL
2021
May 31 Salaries Expense 1,533.50
CPP Payable 76.24
EI Payable 24.23
To record payroll

May 31 Employee Benefits Expense 110.16
CPP Payable 76.24
EI Payable 33.92
To record employer's portion of payroll
c) Record the payment of the statutory deductions to the CRA on June 15, 2021.
JOURNAL
2021
Jun 15 Income Tax Payable 306.70
CPP Payable 152.48
EI Payable 58.15
Cash 517.33
AP-9B LO 11-3, 4
Sigmund Accounting has calculated the gross pay of all its employees for the month of August 2021 to be $43,000.
The company must pay 4% of the gross pay as vacation pay and 1.5% for Workers’ Compensation. The pay date is
August 31, 2021.
Required
a) Calculate and prepare the journal entry for accrued vacation pay.
JOURNAL
2021
Aug 31 Vacation Pay Expense 1,720.00
Vacation Pay Payable 1,720.00
To record accrued vacation pay
638
Payroll Chapter 11
b) Calculate and prepare the journal entry for Workers’ Compensation.
JOURNAL
2021
To record workers' compensation
AP-10B LO 11-2, 3, 4, 5
Learn Company has four employees who are paid on an hourly basis, plus time and a half for hours in excess of
44 hours per week. Payroll information for the week ending June 14, 2021, is listed below.
Total Hourly Income Union

Employee CPP EI
Hours Rate Tax Dues
A. Bee 40 $15.50 $120.00 $30.12 $9.80 $25.00
E. Fields 47 15.00 145.40 35.98 11.49 0.00
L. Parsons 42 15.75 132.30 32.38 10.45 15.00
I. Jay 48 15.00 155.00 37.21 11.85 15.00
Required
a) Assume the employer contributes 100% toward CPP and 140% toward EI. Calculate gross and net pay for each
employee.
Payroll Register
Deductions
Union Total
Employee Gross* Income Tax CPP EI Net Pay
Dues Deductions
A. Bee $620.00 $120.00 30.12 9.80 $25.00 $184.92 $435.08
E. Fields 727.50 145.40 35.98 11.49 0.00 192.87 534.63
L. Parsons 661.50 132.30 32.38 10.45 15.00 190.13 471.37
I. Jay 750.00 155.00 37.21 11.85 15.00 219.06 530.94
Total $2,759.00 $552.70 $135.69 $43.59 $55.00 $786.98 $1,972.02
*Remember to calculate time and a half for overtime hours.
b) Prepare the payroll journal entries for June 14 to pay the employees and accrue the employer contributions.
JOURNAL
2021
Jun 14 Salaries Expense 2,759.00
CPP Payable 135.69
EI Payable 43.59
Cash 1,972.02
To record payroll

639
Chapter 11 Payroll

Jun 14 Employee Benefits Expense 196.72
CPP Payable 135.69
EI Payable 61.03
c) Prepare the journal entry to record the cash payment on June 30 for the employer’s liability to the
government.
JOURNAL
2021
CPP Payable 271.38
EI Payable 104.62
Cash 928.70
To pay liabilities to the government
AP-11B LO 11-6
Determine which internal controls have been violated in the following independent scenarios.
a) Simon’s Shoes is a local footwear retailer that employs five people. The owner, Preeti Simon, hired Janel Carew
as the store’s manager. Janel is responsible for hiring all other staff. Each employee is required to fill out and
submit forms containing their personal information, such as social insurance number and contact information.
Janel is also responsible for collecting the weekly time cards, which she uses to prepare the weekly
paycheques.
The internal control being violated here is a lack of segregation of duties. The owner should either hire
employees and collect personal information or be responsible for reviewing the time cards, preparing the
payroll information or paying (signing the cheques) for the employees.
b) Ravi’s Appliance Repair Depot employs 25 people, of which 20 are full-time and 5 part-time. Employees are
paid weekly by manual cheque. The owner, Ravi Rajinder, believes that his employees are honest and trusts
that they will submit their hours worked by Thursday morning each week, so his bookkeeper can then prepare
the payroll entry in time for employees to be given their paycheque by 3 p.m. each Friday.
The control lacking here is monitoring the days/hours worked by employee. By allowing employees the
freedom to report their hours, the business is vulnerable to potential fraud on the part of the dishonest
employee. The owner should use a time clock, punch cards or other device where the day/time employees
begin and end work is recorded. This information would then be used by management to prepare payroll
entries.
c) County Cleaners employs 50 full-time people, who are paid on the 15th and last day of the month by cheque
from the main bank account of the business. Often, employees have not cashed their cheques as of end-of-
business-day on the last day of the month. Therefore, since the bank statement is prepared on that same day,
the majority of these cheques are usually listed, along with other non-payroll related cheques, as outstanding.
Management has noticed that it seems to take longer each month to prepare the bank reconciliation due to
the large number of outstanding cheques.
Use of an imprest or separate bank account would greatly reduce the number of outstanding cheques being
recorded each month, which would in turn decrease the amount of time require to prepare the reconciliation.
640
Payroll Chapter 11
It would also result in a better review of the details (amounts and names) contained on the cheques being
processed through the payroll bank account. This practice should assist in the detection of errors or fraud (e.g.,
fictitious employee names), as all the cheques would be related to payroll.
AP-12B LO 11-2, 7 (Appendix 11A)
Katrina earns a salary of $52,000 per year and is paid bi-weekly. Assuming her income tax rate is 20%, calculate her
net pay for each bi-weekly pay period in 2021.
Gross Pay 2,000.00

CPP 101.66
EI 31.60
Income Tax 400.00
Net Pay 1,466.74
AP-13B LO 11-7 (Appendix 11A)
Annual salary information for the four salaried employees of Treetop Hospitality Group is as follows:
Raymond Burgess: $38,600
Donald Chen: $89,600
Joanne Dekker: $152,400
Daphne Gacia: $106,500
Employees are paid weekly, and their only deductions are CPP, EI and income taxes at the following rates:
• CPP: 5.45%, $3,500 basic personal exemption; maximum pensionable earnings of $61,600
• EI: 1.58%; maximum insurable earnings of $56,300
• Income taxes: 28
Calculate the net pay for the week ending July 9, 2021 (week 27). Space is provided below to show your calculations.
Weekly Total
Employee CPP EI Income Tax Net Pay
Earnings Deductions
Raymond Burgess $742.31 $36.79 $11.73 $207.85 $256.36 $485.95
Donald Chen 1,723.08 90.24 27.22 482.46 599.93 1,123.15
Joanne Dekker 2,930.77 0 0 820.62 820.62 2,110.15
Daphne Gacia 2,048.08 107.95 32.36 573.46 713.77 1,334.30
July 9 is week 27. Year-to-date earnings:

Raymond Burgess: $742.31 × 27 = $20,042.31 (CPP and EI to be calculated)
CPP = ($742.31 earnings − $67.30 prorated weekly exemption) × 5.45% = $36.79
EI = $742.31 × 1.58% = $11.73
Donald Chen: $1,723.08 × 27 = $46,523.08 (CPP and EI to be calculated)
CPP = ($1,723.08 earnings − $67.30 prorated weekly exemption) × 5.45% = $90.24
EI = $1,723.08 × 1.58% = $27.22
Joanne Dekker: $2,930.77 × 27 = $79,130.77 (maximum limit achieved for CPP and EI)
Daphne Gacia: $2,048.08 × 27 = $55,298.08 (CPP and EI to be calculated)
CPP = ($2,048.08 earnings − $67.30 prorated weekly exemption) × 5.45% = $107.95
EI = $2,048.08 × 1.58% = $32.36
641
Chapter 11 Payroll
AP-14B LO 11-7 (Appendix 11A)
Tony’s TV Store has two employees who earn commission based on sales. The following information is available for
the weekly pay period ended April 24, 2021.
Weekly Commission
Employee Sales
Salary (% of Sales)
Jeff Garcia $200.00 8.30% $2,650
Henry Lu $225.00 6.75% $1,960
Assume a CPP rate of 5.45%, EI rate of 1.58% and tax rate of 30% on gross salary. Calculate the net pay for the
employees.
Weekly Income Total

Employee Commission Gross Pay CPP EI Net Pay
Salary Tax Deductions
Jeff Garcia $200.00 $219.95 $419.95 $19.22 $6.64 $125.99 $151.84 $268.11
Henry Lu $225.00 $132.30 $357.30 $15.80 $5.65 $107.19 $128.64 $228.66
AP-15B LO 11-3, 4, 5, 7 (Appendix 11A)
Lisa Stevenson is an employee of Farmers’ Coop. She is paid weekly and information relating to the current pay
period (ending May 15, 2021) is as follows:
Hours worked: 46.30 hours

Hourly rate: $14.35
Vacation pay: 6.00% (paid weekly on gross pay)
Commission: 5.25% (on sales)
Sales: $10,690
Workers’ compensation rate: 1.25% (remitted quarterly)
CPP rate: 5.45%
EI rate: 1.58%
Income tax rate: 32.80%
Union dues: $1,040.00 (per year, deducted weekly)
Pension contribution: 5.00% (contributed by employer, based on gross wages)
Health care (paid by employer): $56.60 (paid each pay period)
Overtime is paid at time and one-half on hours worked over 44 hours.
Required
a) Calculate the net pay for Lisa.
Gross Pay:
Regular hours (44.00 hours × $14.35) $631.40
Overtime hours (2.30 hours × $21.53) 49.51
Commission ($10,690 × 5.25%) 561.23
Gross pay before vacation pay 1,242.13
Vacation pay ($1,242.13 × 6.00%) 74.53
Gross pay $1,316.66
642
Payroll Chapter 11
Deductions:
CPP $68.09
EI ($1,316.66 × 1.58%) 20.80
Income taxes ($1,316.66 × 32.80%) 431.86
Union dues ($1,040.00 ÷ 52 weeks) 20.00
Total deductions 540.75
Net pay $775.91
b) Prepare the related payroll entries for Lisa, assuming she is paid immediately on May 15.
JOURNAL
2021
CPP Payable 68.09
EI Payable 20.80
Cash 775.91
To record payroll

CPP Payable 68.09
EI Payable 29.12
Pension Plan Payable 65.83

AP-16B LO 11-2, 3, 4, 5, 7 (Appendix 11A)
Rippling Waters rents canoes and other watercraft to campers and hikers. On May 15, 2021, Rippling Waters
prepared its semi-monthly payroll for employees. The current CPP rate is 5.45%, the current EI rate is 1.58%, and
the appropriate income tax rate is 20%. The employer pays half of the health care premium, and the employees
pay the other half. Assume the employer contributes 100% toward CPP and 140% toward EI. Payroll information for
May 15, 2021, is listed below.
Hourly Total Health

Employee Total Hours
Rate Care
M. Swift 87.5 $15.50 $18.00
S. Current 85.5 15.00 20.00
B. Wavey 73.5 16.50 14.00
643
Chapter 11 Payroll
Required
Payroll Register
Deductions
Health Total
Employee Gross Income Tax CPP* EI Net Pay
Care Deductions
M. Swift $1,356.25 $271.25 $65.97 $21.43 $9.00 $367.65 $988.60
S. Current 1,282.50 256.50 61.95 20.26 10.00 348.71 933.79
B. Wavey 1,212.75 242.55 58.15 19.16 7.00 326.86 885.89
Total $3,851.50 $770.30 $186.07 $60.85 $26.00 $1,043.22 $2,808.28
*Remember to properly account for the $3,500 exemption
b) Calculate the employer contributions.
Employer Contributions
CPP 186.07
EI 85.19
Health Care 26.00
c) Prepare the payroll journal entries for May 15, 2021, to record the salaries payable to the employees and accrue
the employer contributions.
JOURNAL
2021
CPP Payable 186.07
EI Payable 60.85
To record payroll

CPP Payable 186.07
EI Payable 85.19

d) Prepare the entry to pay the employees on May 17, 2021.
JOURNAL
2021
May 17 Salaries Payable 2,808.28
Cash 2,808.28
To pay employees
644
Payroll Chapter 11
e) Prepare the entry to pay the liability to the health insurance company on May 31, 2021.
JOURNAL
2021
May 31 Health Care Payable 52.00
Cash 52.00
To pay health care liability
f ) Prepare the entry to pay the liabilities to the government on June 15, 2021.
JOURNAL
2021
CPP Payable 372.14
EI Payable 146.04
Cash 1,288.48
To pay amount owing to government
645
Chapter 11 Payroll
Case Study
CS-1 LO 11-6
Tarantula Publishing prints advertising flyers, booklets and magazines for customers. The company has 12
employees who work the small printing presses and binding machines. Susan is the bookkeeper and deals
with all items relating to the financial recordkeeping of the business. Among her many duties, she prepares all
the paperwork for new hires, collects the punch cards from the employees at the end of each pay period and
completes and signs the paycheques.
When a new employee is hired, the general manager sends the individual to Susan to complete the appropriate
paperwork for payroll. Susan is responsible for properly completing the paperwork regarding the employee’s SIN,
gross pay and other details.
Susan sometimes has to track down employees to get their time cards so she can pay them. Employees manually
fill out the time cards and sometimes take them home in their uniforms.
The general manager does not review the paycheques that Susan writes. He is often too busy dealing with
customers and planning the production runs to have time to do much of the paperwork that Susan presents to
him. Since Susan is allowed to sign cheques, she prepares the cheques and hands them out to the employees.
Susan prepares the paycheques manually and is currently using the 2020 payroll tables to calculate income tax,
CPP and EI deductions. The 2021 year has just started, and Susan is unaware that the rates for income tax, CPP and
EI change each year. She is still using the 2020 payroll tables for 2021 paycheques.
Required
a) What are the consequences of using older payroll tables to calculate payroll deductions?
The older payroll tables will not have the correct rates for income tax, CPP and EI. The incorrect amount for the
deductions will be taken from the employees’ paycheques. If too much is taken as deductions, the employees
will receive a smaller net pay each pay period (but they will get a refund at the end of the year from the
government).
If not enough is taken as deductions, the employees will receive a greater net pay each pay period. They will
have to pay extra taxes at the end of the year. The company will have to explain to the government why it
was not deducting the correct amounts from the employees, and may face a fine.
b) Discuss the control issues with this company and what can be done to implement better controls.
Other than using the incorrect payroll tables, Susan is not doing anything wrong or unethical. However, serious
gaps of control exist within the company.
Segregation of Duties
Although the general manager hires new employees, he is completely removed from the remainder of the
hiring and payroll process. Susan fills out the paperwork regarding the employee’s gross pay and is solely
responsible for the paycheques. It would be very easy for Susan to pay an employee more than what was
agreed upon, or even create an employee that does not exist.
To resolve this control deficiency, the general manager should fill out all the appropriate paperwork before
sending it to Susan. The general manager should also review the paycheques each pay period to ensure that
the gross amounts are correct and each employee that is being paid actually exists. The general manager may
also want to personally hand out the paycheques to employees.
646
Payroll Chapter 11
Monitoring Employees
There is a serious lack of control over time cards. Employees manually fill out the time cards, and the time
cards sometimes leave the premises. Manually completing the time cards allows employees to lengthen the
hours they work and thus receive more pay.
To control the time cards, it would be best if punch cards or electronic swipe cards were used to track
employee hours. This would provide a more accurate count of the hours worked. Positioning the time clock
in a location where Susan or the general manager can see it would also ensure that employees are only
punching or swiping their own card.
Payroll Records
As mentioned in the first question, incorrect payroll tables will lead to the wrong amounts being deducted
from employee’s paycheques.
Susan must get a new set of payroll tables for 2021 in order to complete the paycheques properly. She can
do this by accessing the CRA website. Another alternative is to put all the accounting records in a computer
system and have the software automatically calculate the deductions. The software would also ensure that the
payroll tables are up-to-date and accurate.
647
Chapter 11 Payroll
Notes
648

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Chapter 11

LO 11-3 Describe payroll deductions and employer’s

What is net pay? How is it calculated?

Define statutory deductions, and identify three statutory deductions in Canada.

Define voluntary deductions, and provide three examples of voluntary deductions.

How much must an employer contribute to CPP on behalf of its employees?

How much must the employer contribute to EI on behalf of its employees?

When would a company use a payroll register?

Identify two payroll controls and briefly explain them.

How does an imprest bank account help control payroll?

AS-16 LO 11-7 (Appendix 11A)

Gross pay = 38 hours × $15.60/hour = $592.80

Regular pay 40 hours × $16.50/hour = $660.00

Weekly salary = $65,000 annual salary ÷ 52 weeks = $1,250

Calculate Kim’s net pay.

Net Pay = $1,100 – ($56.28 + $17.38 + $286.00) = $740.34

Employer CPP contribution = $235.08

Employee Deductions Employer Contributions

Total Deductions and

Employee Deductions Employer Contributions

Jun 18 Employee Benefits Expense 4,715.39

PR-12 LO 11-7 (Appendix 11A)

Annual salary $42,000.00

PR-13 LO 11-7 (Appendix 11A)

Wage for the period $1,440.00

PR-14 LO 11-7 (Appendix 11A)

Workers’ Compensation Payment = Gross Pay × (Rate ÷ 100)

PR-15 LO 11-4, 7 (Appendix 11A)

Application Questions Group A

Employee Hours Hourly Rate Income Tax CPP EI

Employee Gross Pay Net Pay

Gross pay (before vacation pay) = 36 hours × $20.25 = $729.00

Description Statutory Voluntary

Gross wages $7,500

a) Calculate the company’s total expense.

b) Calculate the employees’ net pay.

Gross wages $1,500

Net Pay = $1,500 − 300 − 78.08 − 23.70 = 1,098.22

CPP = $78.08 EI = $23.70 × 1.4 = $33.18

b) Prepare the journal entry to record accrued vacation pay.

c) Prepare the journal entry to record the employer’s payroll expense.

Hourly Income Union

Employee Gross Pay Employer CPP Employer EI

b) Calculate and prepare the journal entry for Workers’ Compensation.

Employee Hours Hourly Rate Income Tax CPP EI Union Dues

a) Calculate gross and net pay for each employee.

Gross Income Union Employer's Employer's

b) Prepare the payroll journal entries for December 27, 2021.

Dec 27 Employees Benefits Expense 211.14

AP-12A LO 11-2, 7 (Appendix 11A)

Gross Pay 2,200.00

AP-13A LO 11-7 (Appendix 11A)

Carly Reynolds: $126,500

AP-14A LO 11-7 (Appendix 11A)

Hourly Commission Hours

Hours Hourly Income Total

AP-15A LO 11-3, 4, 5, 7 (Appendix 11A)

Hours worked: 43.25 hours