Question

The payroll of Burton Inc. for March 2018 is as follows. Total payroll was $485,000. Pensionable (CPP) and insurable (EI) earnings were $365,000. Income taxes in the amount of $85,000 were withheld, as were $8,000 in union dues. The EI tax rate was 1.88% for employees and 2.632% for employers, and the CPP rate was 4.95% for employees and 4.95% for employers. 

(a) Prepare the necessary journal entries to record the payroll if the salaries and wages paid and the employer payroll taxes are recorded separately. 

(b) Prepare the entries to record the payment of all required amounts to the Receiver General. 

(c) For every dollar of salaries and wages that Burton commits to pay, what is the actual payroll cost to the company? 

Answer 1

( a )

• Employee Benifit Costs
• To record payroll & payroll deduction.

Particulars	Debit	Credit
Salary Expenses	$4,85,000
Employment Insurance tax payable (3,65,000 * 1.65% )		6,862
Employees income tax payable		85,000
CPP tax payable (3,65,000 * 4.95% )		18,067.50
Employee's union due payable		8,000
Salary payable ( Total Debits - Total Credits )		3,67,070.50

• To record Employer's payroll Particulars

Particulars	Debit	Credit
Employment insurance tax payable ( 3,65,000 * 2.632% )		9,606.80
CPP Tax payable (3,65,000 * 4.95% )		18,067.50
Payroll Taxes Expenses ( 9,606.80 + 18,607.50 )	27,674.30

( b )

• Employer Contributions to CPP & EI
• To record the payment of all required amount to the reciever general & Employee Union

Particulars	Debit	Credit
Employment insurance taxes payable (6,862 + 9,606.8 )	16,468.80
Employee income tax payable	85,000
CPP taxes payable ( 18,067.50 + 18,067.50 )	36,135
Employee Union Payable	8,000
Cash ( Total )		1,45,603.80

( C )

• Salaries & Wages that flounder commits to pay = $4,85,000
• Actual Payroll cost to company ( 4,85000 + 27,674.30 ) = $5,12,674.30