Olney Company Payroll And Tax Record For Week Ending January

Olney Company Payroll and Tax Record for Week Ending January 8

Olney Company is a small manufacturing firm located in Allentown, Pennsylvania, with a workforce of hourly and salaried employees paid weekly. The company follows specific payroll procedures, including detailed calculations of wages, overtime, taxes, and deductions. This assignment involves preparing a comprehensive payroll register based on provided employee data and subsequently recording the necessary journal entries for payroll expenses and taxes.

The task requires entering employee information, calculating regular and overtime earnings, applying relevant tax rates and deductions, and accurately documenting the payroll process for the pay period ending January 8. Additionally, journal entries for payroll expenses, taxes, and payments will be prepared based on these calculations, adhering to specified rates and contribution plans.

Paper For Above instruction

Olney Company’s payroll process involves meticulous calculation of employee wages, applicable taxes, deductions, and employer liabilities, all culminating in accurate financial recording. This paper delineates the step-by-step procedure for preparing the payroll register for the week ending January 8, including computations and journal entries, aligning with accounting standards and payroll regulations.

Employee Data and Hours Worked

The company employs a mix of hourly and salaried employees, each with specific wage rates and payment structures. Rob A. Mangino, Inga C. Flores, Carson S. Palmetto, and other hourly employees are paid based on actual hours worked, recorded in quarter-hour increments, with over 40 hours qualifying for overtime pay at one and a half times their regular rate. Salaried employees, numbered 31, 32, 33, 51, 99, and others, receive fixed weekly, monthly, or yearly salaries, but overtime is calculated if applicable.

Calculating Regular and Overtime Wages

The payroll calculations begin with recording hours worked from the time clerk’s report. For hourly employees, regular hours are capped at 40 hours per week, with any excess constituting overtime. Overtime hours earn 1.5 times the regular hourly rate. For salaried employees, regular earnings equate to their fixed salary, and overtime earnings are only calculated if overtime was worked, which should be explicitly checked.

Regular and Overtime Earnings

The wages per hour are applied to respective hours worked. For example, Rob A. Mangino earning $18.50 per hour would earn $740 for 40 hours, with additional overtime hours multiplied by the overtime rate ($27.75). Salaried employees’ earnings are computed based on their weekly, monthly, or yearly salary divided accordingly, with overtime earnings calculated if relevant.

Taxable Earnings and Deductions

Taxable earnings are identified as the gross weekly earnings before deductions. The following taxes and deductions are then calculated:

  • Social Security (OASDI) at 6.2%, and Medicare (HI) at 1.45%, applicable to taxable earnings.
  • Federal income tax using the wage-bracket method with the percentage method for accuracy specific to Olney’s data.
  • State income tax at 3.07% and city income tax at 1.33% on gross wages.
  • Employer contribution for unemployment taxes: FUTA (0.6% on the first $7,000) and SUTA (3.6785% on the first $9,000). Both employee and employer contributions are computed accordingly.
  • Payroll deductions for SIMPLE plan contributions, group life insurance ($0.85 per employee), and health insurance ($1.65 per employee).

Net Pay Calculation

Net pay is determined by subtracting all deductions—including taxes, insurance, and retirement contributions—from total gross earnings. This figure represents the amount payable via check, assigned sequential check numbers starting at 313.

Journal Entries and Payroll Recording

Following payroll calculations, journal entries are prepared to record payroll expenses and withholdings. The process includes:

  1. Recording gross wages payable and deductions for taxes and other withholdings.
  2. Reversing credits to Salaries Payable for net wages distributed.
  3. Recording employer liabilities for payroll taxes, including FICA, FUTA, and SUTA contributions.
  4. Recording the payment of net wages and payroll taxes on designated payment date.

These entries ensure accurate reflection of payroll liabilities and expenses in the financial statements, conforming to accounting principles and regulatory compliance.

Conclusion

This comprehensive payroll process exemplifies the integration of labor costs, tax obligations, and financial reporting for a small manufacturing firm. Accurate calculations and meticulous record-keeping promote transparency, legal compliance, and sound financial management.

References

  • Garrison, R. H., Noreen, E. W., & Brewer, P. C. (2022). Managerial Accounting (16th ed.). McGraw-Hill Education.
  • Internal Revenue Service (IRS). (2023). Publication 15 (Circular E), Employers Tax Guide. IRS.gov.
  • U.S. Department of Labor. (2023). Payroll Tax Overview. DOL.gov.
  • Olney Company Payroll Guidelines. Internal documentation. (2024).
  • State of Pennsylvania. (2023). Tax Rates and Wage Information. PA.gov.
  • Social Security Administration. (2023). Employer and Employee Wage Reports. SSA.gov.
  • FUTA and SUTA Tax Rates. (2023). Federal and State Unemployment Tax Act. IRS.gov.
  • Scherer, J. J., & Guffey, M. E. (2022). Business Communication: Process and Product. Cengage Learning.
  • American Payroll Association. (2023). Payroll Best Practices. APAhq.org.
  • Paychex. (2023). Payroll Processing and Tax Filing. Paychex.com.

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