In: Accounting
Crane Company had the following selected transactions.
Feb. 2 | Purchases supplies from Supplies R Us on account for $2,500. | |
10 | Cash register sales total $42,300, plus 5% GST and 8% PST. | |
15 | Signs a $34,300, six-month, 6%-interest-bearing note payable to MidiBank and receives $34,300 in cash. | |
21 | The payroll for the previous two weeks consists of salaries of $49,000. All salaries are subject to CPP of $2,262 and EI of $920 and income tax of $8,700. The salaries are paid on February 28. The employer’s payroll expense is also recorded. | |
28 | Accrues interest on the MidiBank note payable. | |
28 | Accrues the required warranty provision because some of the sales were made under warranty. Of the units sold under warranty, 340 are expected to become defective. Repair costs are estimated to be $40 per unit. | |
28 | Pays employees the salaries for the pay period ending February 21. | |
Mar. 1 | Remits the sales taxes to the Province and GST to the Receiver General for the February 10 sales. | |
2 | Makes the payment to Supplies R Us from the February purchase. | |
15 | Remits the payroll taxes owing from the February 21 payroll to the Receiver General. |
ANSWER:
Feb. 2 Supplies................................................................... 2,500
Accounts Payable............................................ 2,500
10 Cash........................................................................ 48,816
Sales................................................................ 43,200
GST Payable.................................................... 2,160
PST Payable.................................................... 3,456
15 Cash........................................................................ 34300
Notes Payable.................................................. 34300
21 Salaries Expense..................................................... 49000
CPP Payable.................................................... 2262
EI Payable....................................................... 920
Income Tax Payable........................................ 8700
Salaries Payable (difference)................................ 37118
21 Employee Benefits Expense................................... 3550
CPP Payable.................................................... 2262
EI Payable ($920 x 1.4)................................... 1288
28 Interest Expense..................................................... 85.75
Interest Payable............................................... 85.75
($34300 x 6% x 1/12 X .5)
28 Warranty Expense................................................... 13600
Warranty Liability. ............................. 13600
(340*$40)
28 Salaries Payable...................................................... 37118
Cash................................................................. 37118
Mar. 1 GST Payable........................................................... 2,160
PST Payable............................................................ 3,456
Cash................................................................. 5,616
2 Accounts Payable................................................... 2,500
Cash................................................................. 2,500
15 CPP Payable ($2262 x 2)....................................... 4524
EI Payable ($920 + $1288).................................... 2208
Income Tax Payable................................................ 8700
Cash................................................................. 15432
Taking It Further:
Some additional mandatory employee benefits paid entirely by the employer include payments to fund the workplace health, safety, and compensation plan. Vacations are also mandatory and the amounts and limits vary among provinces. The remaining benefits are not mandatory and have more to do with the negotiated employment package with employees. The latter could include full or partial payments into pension plans, savings plans, and medical or life insurance related coverage. Finally, again based on a business’ practice, paid absences for sick leave, for example, are additional employee benefits paid by the employer.
Mandatory and negotiated employee benefit costs are accounted for as expenses when incurred.