Learn How to Ace Payroll Accounting Project Chapter 7.30 with This Comprehensive Tutorial
Answers Key Payroll Accounting Project Chapter 7.30
If you are taking a course in payroll accounting, you might be assigned a project that requires you to complete a series of tasks related to payroll processing, recording, reporting, and taxation. One of these projects is the payroll accounting project chapter 7.30, which involves preparing a payroll register, employee earnings records, journal entries, tax reports, and payments for a hypothetical company. In this article, we will explain what payroll accounting is, what the payroll accounting project is, how to complete it step by step, what benefits you can gain from it, what challenges you might face, and how to check your answers using various sources.
answers key payroll accounting project chapter 7.30
What is payroll accounting?
Payroll accounting is the process of recording and reporting the financial transactions related to the compensation of employees for their work. Payroll accounting involves calculating gross pay, deductions, net pay, employer taxes, and other payroll-related expenses for each pay period. Payroll accounting also involves preparing and filing tax forms, such as W-2s, 1099s, 941s, and 940s, as well as making tax payments to federal, state, and local authorities. Payroll accounting is an essential function of any business that has employees, as it ensures compliance with tax laws, labor laws, and accounting standards.
What is the payroll accounting project?
The payroll accounting project is a practical assignment that simulates the real-world tasks of a payroll accountant. The project consists of several chapters that cover different aspects of payroll accounting, such as payroll systems, timekeeping, gross pay computation, deductions, net pay distribution, journalizing and posting payroll transactions, employer payroll taxes, payroll tax reports and payments, fringe benefits, and special situations. The project requires you to use a spreadsheet software, such as Excel or Google Sheets, to perform calculations and create documents.
The payroll accounting project chapter 7.30 is one of the chapters in the project that focuses on journalizing and posting payroll transactions and employer payroll taxes. The chapter provides you with a scenario of a company called Webworks that has four employees who are paid on a biweekly basis. The chapter also provides you with information about the company's payroll policies, tax rates, chart of accounts, general ledger balances, and bank statement. Your task is to prepare a payroll register and employee earnings records for the pay period ending December 15th using the given data. Then, you need to journalize and post the payroll transactions for December 15th and December 31st. Next, you need to journalize and post the employer payroll taxes for December. Finally, you need to prepare the Form 941 for the fourth quarter and the Form 940 for the year using the given data.
How to complete the payroll accounting project chapter 7.30?
To complete the payroll accounting project chapter 7.30, you need to follow these steps:
Step 1: Prepare payroll register and employee earnings records
The first step is to prepare a payroll register and employee earnings records for the pay period ending December 15th using the given data. A payroll register is a summary of the gross pay, deductions, and net pay for all employees for a specific pay period. An employee earnings record is a detailed record of the gross pay, deductions, and net pay for each employee for the year to date. To prepare these documents, you need to use a spreadsheet software and apply the following formulas:
Gross pay = Hours worked x Hourly rate
Federal income tax = Gross pay x Federal income tax rate
Social security tax = Gross pay x Social security tax rate
Medicare tax = Gross pay x Medicare tax rate
State income tax = Gross pay x State income tax rate
Net pay = Gross pay - Total deductions
Here is an example of how the payroll register and employee earnings records might look like:
Employee Hours Worked Hourly Rate Gross Pay Federal Income Tax Social Security Tax Medicare Tax State Income Tax Total Deductions Net Pay --- --- --- --- --- --- --- --- --- --- Noah Body 80 $15.00 $1,200.00 $120.00 $74.40 $17.40 $48.00 $259.80 $940.20 Anna Graham 80 $13.50 $1,080.00 $108.00 $66.96 $15.66 $43.20 $233.82 $846.18 Anita Job 80 $12.00 $960.00 $96.00 $59.52 $13.92 $38.40 $207.84 $752.16 Tom Morrow 80 $11.50 $920.00 $92.00 $57.04 $13.34 $36.80 $199.18 $720.82 Totals: $4,160.00$416.00$257.92$60.32$166.40$900.64$3,259.36 Employee Earnings Record --- Employee: Noah Body Pay Date: December 15th Year-to-Date Totals: Gross Pay: $31,200 Federal Income Tax: $3,120 Social Security Tax: $1,934.40 Medicare Tax: $452.40 State Income Tax: $1,248 Net Pay: $24,445.20 ... (repeat for other employees)
Step 2: Journalize and post payroll transactions
The second step is to journalize and post the payroll transactions for December 15th and December 31st using the given data. Journalizing is the process of recording the debit and credit effects of a transaction in a journal entry format. Posting is the process of transferring the debit and credit amounts from the journal entry to the corresponding accounts in the general ledger.
To journalize and post the payroll transactions, you need to use the following accounts:
Salaries Expense: an expense account that records the cost of paying employees for their work.
Federal Income Tax Payable: a liability account that records the amount of federal income tax withheld from employees' paychecks.
Social Security Tax Payable: a liability account that records the amount of social security tax withheld from employees' paychecks.
Medicare Tax Payable: a liability account that records the amount of medicare tax withheld from employees' paychecks.
State Income Tax Payable: a liability account that records the amount of state income tax withheld from employees' paychecks.
Cash: an asset account that records the amount of money available in the bank.
Salaries Payable: a liability account that records the amount of salaries owed to employees but not yet paid.
ize and post the payroll transactions for December 15th:
Journal Entry for December 15th:
Account Debit Credit --- --- --- Salaries Expense $4,160.00 Federal Income Tax Payable $416.00 Social Security Tax Payable $257.92 Medicare Tax Payable $60.32 State Income Tax Payable $166.40 Cash $3,259.36 Explanation: On December 15th, the company pays its employees for the pay period ending on that date. The company debits Salaries Expense for the total gross pay of $4,160.00 and credits the various tax payable accounts for the total deductions of $900.64. The company also credits Cash for the total net pay of $3,259.36.
Posting to General Ledger:
Account: Salaries Expense --- Date Description Debit Credit --- --- --- --- December 15th Payroll $4,160.00 Account: Federal Income Tax Payable --- Date Description Debit Credit --- --- --- --- December 15th Payroll $416.00 ... (repeat for other accounts)
The same process is repeated for the payroll transaction on December 31st, except that the company does not pay its employees on that date, but instead accrues the salaries payable in a liability account. Here is an example of how to journalize and post the payroll transaction for December 31st:
Journal Entry for December 31st:
Account Debit Credit --- --- --- Salaries Expense $4,160.00 Federal Income Tax Payable $416.00 Social Security Tax Payable $257.92 Medicare Tax Payable $60.32 State Income Tax Payable $166.40 Salaries Payable $3,259.36 Explanation: On December 31st, the company accrues the salaries payable for the pay period ending on that date. The company debits Salaries Expense for the total gross pay of $4,160.00 and credits the various tax payable accounts for the total deductions of $900.64. The company also credits Salaries Payable for the total net pay of $3,259.36.
Posting to General Ledger:
Account: Salaries Expense --- Date Description Debit Credit --- --- --- --- December 31st Payroll Accrual $4,160.00 ... (repeat for other accounts)
Step 3: Journalize and post employer payroll taxes
The third step is to journalize and post the employer payroll taxes for December using the given data. Employer payroll taxes are the taxes that the employer has to pay based on the wages paid to its employees. Employer payroll taxes include social security tax, medicare tax, federal unemployment tax (FUTA), and state unemployment tax (SUTA).
To journalize and post the employer payroll taxes, you need to use the following accounts:
Payroll Tax Expense: an expense account that records the cost of paying employer payroll taxes.
Social Security Tax Payable: a liability account that records the amount of social security tax owed by the employer.
Medicare Tax Payable: a liability account that records the amount of medicare tax owed by the employer.
Federal Unemployment Tax Payable: a liability account that records the amount of federal unemployment tax owed by the employer.
State Unemployment Tax Payable: a liability account that records the amount of state unemployment tax owed by the employer.
To calculate the employer payroll taxes, you need to use the following formulas:
Social security tax = Gross pay x Employer social security tax rate
Medicare tax = Gross pay x Employer medicare tax rate
Federal unemployment tax = Gross pay x FUTA tax rate
State unemployment tax = Gross pay x SUTA tax rate
Total payroll tax expense = Social security tax + Medicare tax + Federal unemployment tax + State unemployment tax
Here is an example of how to journalize and post the employer payroll taxes for December:
Journal Entry for December 31st:
Account Debit Credit --- --- --- Payroll Tax Expense $642.56 Social Security Tax Payable $257.92 Medicare Tax Payable $60.32 Federal Unemployment Tax Payable $66.56 State Unemployment Tax Payable $257.76 Explanation: On December 31st, the company records the employer payroll taxes for the month of December. The company debits Payroll Tax Expense for the total payroll tax expense of $642.56 and credits the various tax payable accounts for the same amount.
Posting to General Ledger:
Account: Payroll Tax Expense --- Date Description Debit Credit --- --- --- --- December 31st Employer Payroll Taxes $642.56 ... (repeat for other accounts)
Step 4: Prepare payroll tax reports and payments
The fourth and final step is to prepare the payroll tax reports and payments for the fourth quarter and the year using the given data. Payroll tax reports are the forms that the employer has to file with the IRS and the state to report the amount of payroll taxes withheld from employees and paid by the employer. Payroll tax payments are the payments that the employer has to make to the IRS and the state to remit the payroll taxes owed.
To prepare the payroll tax reports and payments, you need to use the following forms:
Form 941: a quarterly form that reports the amount of federal income tax, social security tax, and medicare tax withheld from employees and paid by the employer.
Form 940: an annual form that reports the amount of federal unemployment tax paid by the employer.
State payroll tax form: a quarterly or annual form that reports the amount of state income tax and state unemployment tax withheld from employees and paid by the employer. The form varies by state, so you need to check with your state's department of revenue or taxation for the specific requirements.
To fill out the forms, you need to use the data from the payroll register, employee earnings records, journal entries, and general ledger accounts. You also need to follow the instructions and deadlines provided by the IRS and the state for filing and paying the taxes.
the Form 941 for the fourth quarter:
Form 941 for the fourth quarter:
Line Description Amount --- --- --- 1 Number of employees 4 2 Wages, tips, and other compensation $16,640.00 3 Federal income tax withheld from wages, tips, and other compensation $1,664.00 5a Taxable social security wages $16,640.00 5a(i) Taxable social security tips $0.00 5b Taxable Medicare wages and tips $16,640.00 5c Taxable wages and tips subject to Additional Medicare Tax withholding $0.00 5d Total social security and Medicare taxes (Line 5a x 0.124 + Line 5b x 0.029) $2,575.36 6 Total taxes before adjustments (Line 3 + Line 5d) $4,239.36 7a Current quarter's adjustment for fractions of cents $0.00 7b Current quarter's adjustment for sick pay $0.00 7c Current quarter's adjustment for tips and group-term life insurance $0.00 8 Total taxes after adjustments (Line 6 + Line 7a + Line 7b + Line 7c) $4,239.36 9 Advance EIC payments made to your employees for the quarter (if any) $0.00 10 Total taxes after adjustments and advance EIC (Line 8 - Line 9) $4,239.36 11a-11d Qualified small business payroll tax credit for increasing research activities (if any) $0.00 12a-12e Deferred amount of the employer share of social security tax (if any) $0.00 13a-13d Total deposits for this quarter, including overpayment applied from a prior quarter and overpayment applied from Form 941-X, 941-X (PR), or Form 944-X filed in the current quarter (if any) $4,239.36 14a-14c Balance due (if any) (Line 10 - Line 11 - Line 12 - Line13) or Overpayment (if any) (Line11 + Line12 + Line13 - Line10) $0.00 Explanation: The Form 941 for the fourth quarter reports the amount of federal income tax, social security tax, and medicare tax withheld from employees and paid by the employer for the months of October, November, and December. The form is filled out using the data from the payroll register and employee earnings records for those months. The form also shows that the employer has made timely deposits of the taxes owed and has no balance due or overpayment.
The same process is repeated for the Form 940 for the year, except that the form reports the amount of federal unemployment tax paid by the employer for the entire year. Here is an example of how to prepare the Form 940 for the year:
Form 940 for the year:
Line Description Amount --- --- --- A1-A3 State where you paid unemployment tax this year (if any) and whether you paid all state unemployment tax by January 31st of next year (if applicable) or whether you had an approved credit reduction state (if applicable) Washington; Yes; No B1-B3 Employer identification number (EIN), name, and trade name (if any) of your business or organization as shown on your quarterly or annual federal tax return(s) this year (if any) or as shown on your application for an EIN (Form SS-4) if you have not filed a return this year (if any) or as shown on your most recent correspondence from us about this form if you have not filed a return this year or applied for an EIN this year (if any) or as shown on your most recent correspondence from us about this form if you have not filed a return this year or applied for an EIN this year or received correspondence from us about this form this year (if any) or as shown on your most recent correspondence from us about this form if you have not filed a return this year or applied for an EIN this year or received correspondence from us about this form this year or filed a return this year (if any) 12-3456789; Webworks; N/A C1-C4 Address of your business or organization as shown on your quarterly or annual federal tax return(s) this year (if any) or as shown on your application for an EIN (Form SS-4) if you have not filed a return this year (if any) or as shown on your most recent correspondence from us about this form if you have not filed a return this year or applied for an EIN this year (if any) or as shown on your most recent correspondence from us about this form if you have not filed a return this year or applied for an EIN this year or received correspondence from us about this form this year (if any) or as shown on your most recent correspondence from us about this form if you have not filed a return this year or applied for an EIN this year or received correspondence from us about this form this year or filed a return this year (if any) 123 Main Street, Seattle, WA 98101 D1-D2 Name and phone number of the person to contact if we have questions about the information on this form Jane Doe; 555-1234 1 Total payments to all employees $62,400.00 2 Payments exempt from FUTA tax $0.00 3 Total of payments made to each employee in excess of $7,000 $0.00 4 Subtotal (Line 1 - Line 2 - Line 3) $62,400.00 5a-5c If any of the wages that are taxable for FUTA tax are also exempt from state unemployment tax, enter the amount here. Otherwise, enter zero. $0.00 6 Total taxable FUTA wages (Line 4 - Line 5) $62,400.00 7a-7c FUTA tax before adjustments (Line 6 x 0.006) $374.40 8a-8c If you made state unemployment tax payments by January 31st of next year, enter the amount here. Otherwise, enter zero. $374.40 9a-9c If you paid wages in a credit reduction state, enter the amount here. Otherwise, enter zero. $0.00 10a-10c Balance due (if any) (Line 7 - Line 8 + Line 9) or Overpayment (if any) (Line 8 - Line 7 - Line 9) $0.00 Explanation: The Form 940 for the year reports the amount of federal unemployment tax paid by the employer for the entire year. The form is filled out using the data from the payroll register and employee earnings records for the year. The form also shows that the employer has paid all state unemployment tax by January 31st of next year and has no balance due or overpayment.
The same process is repeated for the state payroll tax form, except that the form reports the amount of state income tax and state unemployment tax withheld from employees and paid by the employer for the quarter or the year, depending on the state's requirements. Here is an example of how to prepare the state payroll tax form for Washington:
State Payroll Tax Form for Washington:
Line Description Amount --- --- --- A1-A3 Employer account number, name, and trade name (if any) of your business or organization as shown on your quarterly or annual state tax return(s) this year (if any) or as shown on your application for an account number (Form BLS-700-028) if you have not filed a return this year (if any) or as shown on your most recent correspondence from us about this form if you have not filed a return this year or applied