(5-10 min.) S 11-5 1. These are contingent liabilities because at the time of the note Harley-Davidson, Inc. was not liable for any of these product losses because they had not yet occurred. 2. The contingency can become a real liability if the user of a Harley-Davidson product suffers a loss for which the company is responsible. Harley-Davidson must pay for all losses up to $3 million and all losses above $25 million per claim. The company is insured against losses for individual claims between $3 million and $25 million—for these losses, the company would pay the deductible amount specified in its insurance policy. (10 min.) S 11-6 1. Straight-time pay for 40 hours $840.00 Overtime pay for 10 hours: [10($840/401.5)] 315.00 Total pay $1,155.00 2. Total pay $1,155.00 Less: Withheld income tax ($1,1550.20) $231.00 Withheld CPP ($1,1550.0495) 57.17 Withheld EI ($1,1550.0183) 21.14 309.31 Net pay $845.69 (10 min.) S 11-7 Straight-time pay for 40 hours $ 840.00 Overtime pay for 10 hours: [10(840/40 1.5)] 315.00 Total pay to employee 1,155.00 Employer payroll expenses: CPP expense ($57.17 from S11-6) 57.17 EI expense (1.4 $from S11-6) 29.60 Pension ($1,1550.05) 57.75 Provincial health insurance ($60 / 4) 15.00 Disability insurance ($8 / 4) 2.00 161.52 Total expense of employer $ 1,316.52
(10-20 min.) S 11-8 a. Journal DATE ACCOUNT TITLES AND EXPLANATIONS POST. REF. DEBIT CREDIT Salary Expense (see S 11-6) 1,155.00 Employee Income Tax Payable (S 11-6) 231.00 Pension Plan Payable (S 11-6) 57.17 Employment Insurance Payable (S 11-6) 21.14 Salary Payable 845.69 To record salary expense and employee withholdings. b. Journal DATE ACCOUNT TITLES AND EXPLANATIONS POST. REF. DEBIT CREDIT Pension Expense (S 11-7) 57.75 Provincial Health Insurance Expense (S 11-7) 15.00 Disability Insurance Expense (S 11-7) 2.00 Employee Benefits Payable 74.75 To record employee benefits payable. c. Journal DATE ACCOUNT TITLES AND EXPLANATIONS POST. REF. DEBIT CREDIT Employee Benefits Expense 86.77 Pension Plan Payable (S 11-7) 57.17 Employment Insurance Payable (S 11-7) 29.60 To record employer’s payroll expenses. EI Payable is calculated as $21.14 x 1.4 = $29.60.
Instructional Note: Student responses may vary considerably. Req. 1 (solving for missing payroll amounts) (20-30 min.) P 11-3A Employee Earnings: Regular employee earnings $19,947 Overtime pay 5,595 a Total employee earnings 25,542 b Deductions and Net Pay: Withheld income tax 6,379 Canada Pension Plan 549 c Employment Insurance 478 Medical Insurance 541 Total deductions 7,947 Net pay 17,595 Accounts Debited: Salaries Expense 16,923 d Wages Expense 6,938 Sales Commission Expense 1,681 Computations (in order of calculation): b. Total employee earnings: Total deductions ($7,947) + Net pay ($17,595) = Total employee earnings ($25,542) a. Overtime pay: Total employee earnings ($25,542) – Regular employee earnings ($19,947) = Overtime pay ($5,595) c. Pension Plan: Total deductions ($7,947) – Withheld income tax ($6,379) – Employment Insurance ($478) – Medical Insurance ($541) = Canada Pension Plan ($549) d. Salary Expense: Total employee earnings ($25,542) – Wages expense ($6,938) – Sales commission expense ($1,681) = Salaries expense ($16,923)
Employee Earnings: Regular earnings $172.768 a Overtime pay 13,994 Total employee earnings 186,762 b Deductions and Net Pay: Withheld income tax 31,704 Pension Plan 9,200 Employment Insurance 3,492 Dental and drug insurance 1,556 Total deductions 45,952 c Net pay 140,810 Accounts Debited: Salaries Expense 66,468 Wages Expense 60,938 d Sales Commission Expense 59,356 Computations (in order of completion): c. Total deductions = $31,704 + $9,200 + $3,492 + $1556 = $45,952 b. Total employee earnings: Total deductions = ($45,952) + Net pay ($140,810) = Total employee earnings ($186,762) a. Regular earnings: Total employee earnings = [($186,762) – Overtime pay ($13,994) = Regular earnings ($172,768)] d. Wages expense: Total employee earnings ($186,762) – Salaries expense ($66,468) – Sales commission expense ($59,356) = Wages expense ($60,938) Req. 2 (payroll entry) (continued) P 11-3B General Journal DATE ACCOUNT TITLES AND EXPLANATIONS POST. REF. DEBIT CREDIT Salaries Expense 66,468
Apr. Employee Benefits Expense CPP Payable 5,160 EI Payable ($1,520 × 1.4) 2,128 To accrue employer’s portion of the benefits use 1/5 of the standard weekly payroll. 5. May 4 Salaries payable 67,206 Sales salaries expense (4/5 x 334,000) 267,200 Jobsite salaries expense (4/5 x 54,000) 43,200 Office salaries expense (4/5 x 116,000) 92,800 Income Tax payable (4/5 x 99,372) 79,498 CPP payable (4/5 x 25,800) 20,640 EI payable (4/5 x 7,600) 6,080 RRSP contribution payable (4/5 x 15,200) 12,160 Blue Cross Insurance payable (4/5 x 20,000) 16,000 Cash or Salaries payable 336,028 6. May 4 Employee Benefits Expense 29,152 CPP Payable 20,640 EI Payable ($6,080 × 1.4) 8,512 To record employer’s portion of the benefits. 7. May 15 Income Tax payable (99,372 + 19,874) 119,246 CPP payable (25,800 x 2) + (5,160 x 2) 61,920 EI payable (7,600 + 10,640 + 1,520 + 2,128) 21,888 Cash 203,054 To record remittance to CRA. 8. 31 RRSP contribution payable (15,200 + 3,040) 18,240 Blue Cross Insurance payable (20,000 + 4,000) 24,000 Cash (cheque to financial institution) 18,240 Cash (cheque to Blue Cross) 24,000 To record remittances for RRSP and Blue Cross contributions. (30-50 min.) P 11-9B Req. 1 General Journal