Question

Kevin Nguyen works for ABCO Corporation at a salary of $700 per week. He is paid every two weeks. The following is deducted from his bi-weekly pay: income tax $185, CPP $60, and EI premiums of $25. The employer is also required to make employee contributions of $60 to CPP and EI premiums of $35. Indicate which of the following statements are correct (Select as many as appropriate.)

a. Kevin’s net pay for the period will be $1,130

b. The salary expense for the two week period will be $1,400

c. The employee benefit expense for the two week period will be $285.

d. Immediately before making a payment to the government, the company will have a balance of $60 in its CPP payable account.

e. Immediately before making any payments to the government, the company will have a balance of $185 in its Employee Income Tax Payable account

f. The total payment remitted to the government for amount withheld from Kevin’s pay for contributions to CPP and EI will be $355.

g. The EI Payable, CPP Payable and Employee Income Tax Payable accounts are not considered current liabilities because companies usually employ employees for longer than a year.

Answer 1

Working:

Gross pay ($700 x 2)		1400
Less: Deductions
Income tax	185
CPP	60
EI	25
Total deductions		270
Net pay $		1130

Employee benefit expense:
CPP	60
EI	35
Total employee benefit expense $	95

Based on the above computation, the following statements are correct:

a. Kevin's net pay for the period will be $1,130.

b. The salary expense for the two week period will be $1,400

e. Immediately before making any payments to the government, the company will have a balance of $185 in its Employee Income Tax Payable account

The following statements are incorrect:

c. The employee benefit expense for the two week period will be $285.

The total employee benefit expense for the two week period is $95 and not $285.

d. Immediately before making a payment to the government, the company will have a balance of $60 in its CPP payable account.

The balance in the CPP payable account will be the employee's contribution and the employer's contribution which is $60 + $60 = $120 and not $60.

f. The total payment remitted to the government for amount withheld from Kevin’s pay for contributions to CPP and EI will be $355.

The amount withheld from Kevin's pay for contributions to CPP and EI are $60 + $25 = $85 and not $355.

g. The EI Payable, CPP Payable and Employee Income Tax Payable accounts are not considered current liabilities because companies usually employ employees for longer than a year.

Liabilities payable within a period of 12 months are considered current liabilities and hence the EI Payable, CPP Payable and Employee Income Tax Payable are all considered current liabilities.