Solution Manual For Payroll Accounting 2021, 7th Edition

SM 2-1 SOLUTIONS MANUAL: CHAPTER 2 END OF CHAPTER ANSWERS ANSWERS TO STOP AND CHECK EXERCISES What’s in the File? 1. A, B, D, E 2. B 3. D 4. A 5. C Who Are You? 1. Student answers will vary. One possible way to prove both identity and employment is a current U.S. passport. Alternatively, a current state-issued driver’s license and a Social Security card will work for the purposes of the I-9. 2. Student answers will vary. When evaluating the earnings of more than one job, the breakdown of includable amount by pay period is often overlooked. 3. Student answers will vary. Examples of statutory employees include: A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products or who picks up and delivers laundry or dry cleaning, if the driver is a single company’s agent or is paid on commission. A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. An individual who works at home on materials or goods that a company supplies and that must be returned to that company or a designated agent in accordance with furnished specifications for the work to be done. A full-time traveling or city salesperson who works on a single company’s behalf and turns in orders from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for that single company must be the salesperson’s principal business activity. Exempt vs. Nonexempt 1. Exempt workers are exempt from the overtime provisions of FLSA. Exempt workers tend to be employees in a company’s managerial or other leadership functions, in which they may need to work more than 40 hours per week to complete their tasks. Exempt workers usually receive a fixed salary per period that is not based on the number of hours worked. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-2 Nonexempt workers tend to be compensated on an hourly basis and often do not have managerial or leadership responsibilities. It should be noted that some nonexempt workers do have managerial or leadership responsibilities and may receive a fixed salary; however, these employees are covered by the overtime provisions of FLSA. 2. C (40 hours) 3. The leased employee is a common-law employee of the firm, whereas the temporary employee is an employee of the temporary agency. Worker Facts 1. Hourly workers and nonexempt employees are protected by the FLSA 2. Exempt workers receive a fixed amount of money and generally direct the actions of other employees; nonexempt workers are eligible for overtime and generally have their work directed by a manager. 3. Commission workers are typically tied to sales completed by the individual; piece rate pay is determined by the number of pieces the employee completes during a shift or period. 4. Student answers may vary but should include: Minimum hourly rate is set by the U.S. Federal government. Minimum wage rates can and do vary per state, and different parts of the same state may have different minimum wages. The minimum wage may differ from a “living wage,” which is an amount needed to meet basic subsistence needs. A calculating tool was provided in the chapter for discussion on various location living wages. Who Does Which Job? Student answers will vary. The answer should reflect a clear separation of duties, cross-training, rotation of tasks, and security protocols. Internal Controls and Audits 1. B 2. C Destroy and Terminate 1. Paper payroll records should be shredded or burned. Computer records should be purged from the server and all other storage devices. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-3 2. Charlie should receive his final pay on October 11, and not later than October 12. His employer is not required to provide him with a severance package, although he may be eligible for his accrued vacation pay. ANSWERS TO END-OF-CHAPTER MATERIALS REVIEW QUESTIONS 1. What are the necessary elements of internal controls for a payroll department? a. Payroll system design, authorized signers, documentation, and review of the process 2. Why should more than one person prepare/verify payroll processing? a. Internal controls and verification to avoid fraud or theft 3. What documents should be included in all new hire packets? a. I-9 and W-4 4. Why are new hires required to be reported to the state’s employment department? a. The enforcement of child support and legal withholdings, ensuring immigrants are still eligible to work, verification of professional licensing/qualifications, administration of COBRA benefits 5. For the state in which you live, when must a terminated employee be paid his or her final paycheck? a. Student answers will vary. This is a state specific regulation time ranging from the point of discharge to no time requirements. 6. What are the five main payroll frequencies? a. Daily, weekly, biweekly, semimonthly, monthly 7. What are two of the best practices in establishing a payroll system? a. Student answers will vary but should include: keep any requests for leave with the related paystubs, file retention schedule, have more than one person responsible for the duties/verification, and separation of duties 8. What are the important considerations in setting up a payroll system? Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-4 a. Pay frequency, pay types, method of payment, benefits, manual/computerized/outsourced payroll processing, file security system 9. What are the different tasks involved in payroll accounting? a. Entering the employees, entering the hours, calculation of gross wages, preparation of paychecks, payment of taxes, reporting requirements 10. 11. What agencies or organizations can audit a company’s payroll records? 1. The Internal Revenue Service (IRS) 2. Federal and State Departments of Labor 3. Department of Homeland Security 4. Other state and local agencies 5. Labor unions How long should employee records be retained? a. For a three-year period, with some records being required for up to 6 years 12. Why are independent contractors not paid through a company’s payroll system? a. Individuals classified as independent contractors are treated as vendors and paid outside of payroll. 13. What is the difference between termination and resignation? a. An employee is terminated by the employer; when the employee initiates the separation it is a resignation. Employees who resign will receive their final paycheck in the normal payroll cycle, whereas terminated employees may be required to receive theirs sooner. 14. What are the differences between daily, weekly, biweekly, semimonthly, and monthly pay periods? a. A daily period is based on work performed in one 240hour period, weekly pay period is for one-week, biweekly pay period is two weeks long, semi-monthly pay period is twice a month, and monthly pay period is once a month. 15. What differentiates exempt and nonexempt employees? Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-5 a. Nonexempt employees are covered under the Fair Labor Standards Act (FLSA) and are typically in non-supervisory positions. Exempt employees are typically in managerial positions, are exempt from overtime pay requirements, and the FLSA. 16. What challenges does a company face when using cloud-based payroll and personnel records? a. Cloud-based payroll and personnel systems can be compromised by hackers. Personnel information could be obtained by people outside the company and users may not be able to access their accounts. 17. What two regulations pertain to employee paycard use? a. Regulation E and Regulation Z EXERCISES SET A E2-1A. Krystal Valdez, a nonexempt employee at Misor Investments, works a standard 8:00– 5:00 schedule with an hour for lunch. Krystal received overtime pay for hours in excess of 40 per week. During the week, she worked the following schedule: 4. 2.25 Monday 7.5 hours Tuesday 8.25 hours Wednesday 8 hours Thursday 8.5 hours Friday 10 hours Total 42.25 42.25-40.00=2.25 E2-2A. Roger Ortega receives her pay twice per month working for Megaveo Enterprises. Which of the following choices describes his pay frequency? 2. Semimonthly E2-3A. Lila Rivera is a new employee for Divera Glass. Which Federal forms must he complete as part of the hiring process? 1. W-4 4. I-9 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-6 E2-4A. Wilbur Matthews, a resident of Wisconsin, ended his employment with Bovill Farms on December 4, 2020. The next pay date for the company is December 18. By what date should he receive his final pay? 3. December 18 E2-5A. Charlene Kelley is a new nonexempt sales clerk for Oyondo Retail Stores. She completes her time card for the pay period. To ensure proper internal control, what is the next step in the payroll review process? 3. Submit the time card to her manager for review. E2-6A. Alfonso Silva needs additional filing space at the end of the year in the company’s offsite, secured storage. He sees several boxes marked for the current year’s destruction. What methods can Alfonso use to dispose of the payroll records? (Select all that apply.) 1. Contact an offsite record destruction service. 3. Shred the records, then dispose of the shredded paper. 4. Incinerate the payroll records marked for destruction. E2-7A. Ed Myers is verifying the accuracy and amount of information contained in the employee records for his employer, Genible Industries. Which of the following items should be present in the employee information? (Select all that apply) 1. Job title 2. Social Security number 4. Employee address E2-8A. Ginger Klein is the payroll clerk for Neolane Transportation. A colleague who is classified as an independent contractor requests to be classified as an employee. What factors should Ginger consider? (Select all that apply.) 1. Relationship of the Parties 2. Behavioral Control Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-7 4. Financial Control E2-9A. What are the forms of identification that establish identity for the I-9? (Select all that apply.) 1. Driver’s License. 2. Native American Tribal document. 3. Voter’s Registration card. E2-10A. What are the forms of identification that establish employment authorization for the I-9? (Select all that apply.) 1. U.S. Citizen I.D. Card. 2. U.S. Passport. 4. Certified copy of the birth certificate. E2-11A. Jamie Patil is a candidate for the position of sales manager with Retrozz Furniture. She is going to be required to supervise several employees and can determine the direction in which she will complete the assignments given to her. What guidelines should she follow when classifying workers as exempt or nonexempt? 2 FLSA 3. Department of Labor 4. IRS E2-12A. Susana Robledo is the office manager for Wardley and Sons Auto Detailing. Because it is a small office she is required to keep track of all employee records and pay both employees and contractors. Which of the following are legal factors that will differentiate between exempt and nonexempt employees? (Select all that apply.) 2. Type of work performed 4. Amount of supervisor-given direction Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-8 PROBLEM SET A P2-1A. Henrietta Morales is a salaried employee earning $75,000 per year. Calculate the standard gross salary per pay period under each of the following payroll frequencies: a. b. c. d. Biweekly Semimonthly Weekly Monthly $75,000/26 = $2,884.62 $75,000/24 = $3,125.00 $75,000/52 = $1,442.31 $75,000/12 = $6,250.00 P2-2A. Beth Caldwell is in the payroll accounting department of Acerill Films. An independent contractor of the company requests that Social Security and Medicare taxes be withheld from future compensation. What advice should Beth offer? a. As an independent contractor they would be responsible for their own payments and these would not be withheld by the company P2-3A. You are the new payroll supervisor for your company. Which payroll documentation control procedures are now your responsibility? a. Payroll system security, Maintenance of paid time off (i.e., vacation, sick, etc.), Access to payroll data, Separation of duties, Training of payroll staff P2-4A. Leona Figueroa is a new employee in the payroll department of Octolium Computers. After working at the company for one week, she asks you why it is so important to submit new hire documentation. What guidance will you offer her? a. Reporting creates a registry to monitor child support obligations, tracks immigration to ensure individuals are legal to work in the United States, ensures that individuals in professions that can have sanctions are legally able to continue to work, finally to enable the tracking of COBRA benefits. P2-5A. You are the payroll accounting clerk for your company, Conose Advertising, which has 50 employees. The controller has recently switched the firm from an in-house payroll system to Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-9 an outsourced payroll provider. What are your responsibilities within the company for payroll records and employee file issues? a. Even with outsourced payroll the company is responsible for maintaining records, responsible retention periods, ensuring timely filing of tax and withholding amount, and document destruction. P2-6A. Aaron Tallchief is a citizen of the Northern Pomo Indian Nation. In completing his I-9, he provides an official Northern Pomo Nation birth certificate to establish identification and employment eligibility. Is this sufficient documentation? Why or why not? a. Yes, these are acceptable since this would fulfill the requirements of items from type B and type C of the acceptable documents. P2-7A. Ian Burns is the new payroll accountant for ECG Marketing. Certain employees have been requesting changes in classification from nonexempt to exempt. How do the U.S. Department of Labor guidelines help him answer the employees’ questions? a. The U.S. Department of Labor requires that employees meet all tests to achieve exempt status under one of the following: executive exemption, administrative exemption, and professional exemption. P2-8A. Twinte Cars, a California corporation, has internal corporate requirements that stipulate a three-year payroll document retention period. They enter into a contract with an international company that mandates a six-year payroll document retention requirement. How should Twinte Cars balance these requirements? a. The longer retention period would be appropriate to satisfy the record retention requirements under the contract. b. The period for retention could be up to 8 years depending upon the circumstances. P2-9A. Ted McCormick is a full-time life insurance agent with Centixo Insurance, a small insurance company. The company has classified him as an employee, and he feels that he should be classified as an independent contractor because he receives no company benefits and sets his own office hours. Should he be reclassified as an independent contractor? Why or why not? Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-10 a. Of the three tests, Ted does not meet the relationship of the parties and should be treated as an employee. P2-10A. Evelyn Hardy is an employee of Polyent Plastics, a company with headquarters in Rock Island, Illinois. She lives and works in Doha, Qatar, and earns an annual salary of $97,300. The company has been withholding U.S. federal income taxes from her pay, but Evelyn believes that she should be exempt because she is an expatriate. What course of action should Evelyn take? a. Evelyn would need to file IRS Foreign Earned Income Exclusion P2-11A. Complete the W-4 for employment at Superore Wheels starting 3/16/2020 the employers address is 6150 Speedtrack Road, Montrose, CO, 81401 and EIN is 91-1701225. Erma Jane Grant 441 West Hill Road Montrose, Colorado 81401 SSN: 432-55-6792 Marital Status: Single Does not require any additional amount to be withheld Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-11 P2-12A. Complete the I-9 for employment at Superore Wheels at 6150 Speedtrack Road, Montrose, Colorado 81401. Erma is starting 3/16/2020. Be sure to complete Section 2 of Form I9. Erma Jane Grant 441 West Hill Road Montrose, Colorado 81401 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-12 SSN: 432-55-6792 Maiden Name: Grant Marital Status: Single Date of Birth: June 12, 1986 U.S. Citizen Erma presented her passport for her employer to review. Passport number 389049392, issued by the United States State Department, expires April 1, 2026. Administrative assistant Samantha Cook verified the information for the company. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-13 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-14 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-15 EXERCISE SET B E2-1B. Stacy Romero, a nonexempt employee of Prosaria Publishers, works a standard 6:00– 3:00 p.m. schedule with an hour for lunch. Stacy works in a state requiring overtime for hours over 8 per day and for those over 40 in a week. During the week, she worked the following schedule: Monday Tuesday Wednesday Thursday Friday 8.25 hours 8 hours 8.75 hours 7 hours 9 hours Based on the requirements above, how much overtime has Stacy worked during the period? 4. 3 hours 8.25 + 8 + 8.75 + 7 + 9 = 41 hours for 1 hour of overtime 1 + .25 +.75 + 1 = 3 hours total E2-2B. Grant Saunders is a salaried employee earning $84,000 per year who receives pay every other week. Which of the following best describes the pay frequency? 1. Biweekly E2-3B. On October 30, 2020, Dolores Goodman quit her job after ten years with Omnivue Optics in Utah. Omnivue Optics pays employees weekly on Fridays. Upon quitting, Dolores had 38.5 hours of vacation accrued that she had not used, and she had worked 45 hours, 5 hours of which was subject to overtime. When must she receive her final paycheck? 1. On the next pay date. E2-4B. Adrienne Norman ended her employment with Univee Inc. on December 16, 2020. When is the earliest that Univee Inc. may destroy her payroll records? 3. December 16, 2023 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-16 E2-5B. Elijah Brown is a new payroll clerk at Zata Imports, a company with 250 employees. He has completed entering all time card data for the pay period. What should Elijah’s next step in the payroll review process be? 3. Ask his supervisor to verify the accuracy of the payroll data. E2-6B. Elaine Wheeler needs additional filing space at the end of the year in the company’s office and chooses to use offsite, secured storage. Upon arriving at the storage facility, she discovers that the unit is nearly full and sees several boxes marked for destruction at the end of the calendar year. What are Elaine’s obligations regarding the destruction of the payroll records marked for destruction? (Select all that apply.) 2. She should make arrangements to pulp or burn the payroll records marked for destruction. 3. She should arrange to have a document destruction service pick up the boxes marked for destruction. 4. She should bring a shredding machine to the storage facility and prepare to shred the records marked for destruction. E2-7B. Gerardo Rogers is conducting a review of the payroll files for each employee at Meejo Games. Which of the following items must be present in the file? (Select all that apply.) 1. Basis upon which compensation is paid. 2. Overtime pay earned during each pay period. 3. Hours worked during each pay period. E2-8B. Jane McCarthy is preparing to compute employee pay and needs to determine the amount of employee federal income taxes to be withheld. Which of the following should she consult? 2. IRS Publication 15-T E2-9B. John Franklin is a new employee of the Camidel Clothiers. Which of the following will provide proof of identity for the completion of the I-9? (Select all that apply.) 1. U.S. Passport – a U.S. Passport will establish both identity and employment authorization. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-17 2. U.S. Military Identification Card. 4. New York driver’s license. E2-10B. Sheri Jennings is completing the I-9 for her new employment at Insulend Tours. Which of the following provides proof of her employment authorization? (Select all that apply.) 1. Social Security Card. 2. Certificate of birth abroad, issued by the U.S. Department of State. 4. U.S. Passport – a U.S. Passport will establish both identity and employment authorization. E2-11B. Laverne Watkins is a candidate for the position of marketing clerk with the promotions department of Paramba Productions, earning $10.25 per hour. She will work occasional overtime in her new position and will not have managerial or supervisory duties as a regular part of her job description. Why should Laverne be classified as a nonexempt employee? (Select all that apply.) 2. She has no supervisory or managerial duties 3. She has the term clerk in her job title E2-12B. Rex Marshall manages a ski resort with year-round and seasonal employees. Assuming that the ski resort engages in interstate commerce, which are the FLSA requirement(s) that Rex should consider? 1. Hourly wages paid to employees 3. Number of hours worked per week 4. Employee age and weekly work schedule PROBLEM SET B Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-18 P2-1B. Tasha Webb is an independent contractor for Antimbu Exports, where you are the payroll accountant. She feels that she should receive employee benefits because of the number of hours that she dedicates to the company. What guidance can you offer Tasha? a. Independent contractors are most frequently treated as a vendor and would not be included in employee benefits. There are specific tests that determine the relationship between employer and employee; however, the number of hours committed is not one of the defining traits. P2-2B. Joseph Lyons was terminated for cause from Telecy Industries in Hawaii, on August 21, 2020. As of the date of his termination, he had worked 22 hours of regular time. Employees at Telecy are paid semimonthly on the 15th and last day of the month. Joseph would like to know when he will be paid for the accrued hours. What will you tell him? a. Hawaii requires that when an employee is terminated their final pay is given at the time of termination or on the next business day if financially unable to issue the check. P2-3B. Sara Northman, a member of the Algonquin Indian Nation, is a new employee at Predeo Game Design. During the process of completing her I-9, she claims that the only way to prove her identity is the Algonquin Indian National official birth certificate. Is this document sufficient to prove employment authorization for the purposes of the I-9? Explain. a. Algonquin Indian National official birth certificate would be adequate as it can fulfill both requirements for establishing identity and employment verification. P2-4B. Abraham Manning is a new employee of Symity Batteries. He is curious about the purpose of the requirements for new hire documentation to be forwarded to government agencies. What should you tell him? a. Reporting creates a registry to monitor child support obligations, tracks immigration to ensure individuals are legal to work in the United States, ensures that individuals in professions that can have sanctions are legally able to continue to work, finally to enable the tracking of COBRA benefits. P2-5B. Frances Perez wants to start her own company. As a seasoned payroll professional, she approaches you for guidance about the differences between weekly, biweekly, and semimonthly pay periods. What would you tell her? Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-19 a. Weekly payroll is where individuals will receive 52 paychecks per year and are suited for companies that are small, such as construction or professional entities. Biweekly payroll is where individuals will receive 26 paychecks per year processed every two weeks and is one of the more common pay periods; occasionally this method may result in 27 pay periods. Semimonthly is where employees will receive 24 paychecks per year. P2-6B. Katrina Wilkins is a new payroll clerk for Remm Plumbing. She is curious about the purpose of the different steps in the payroll review process and asks you, her supervisor, for guidance. What would you tell her? a. The payroll review process is designed to verify the information so that employees are paid correctly and the data is correct. Starting with the employee completing their time card, the information is then verified by the manager. After the manager has agreed that the employee has accurately portrayed the hours worked, the payroll clerk will prepare the information for the manager to review and approve. Once the information has been approved, the payroll checks can be issued to the employees. P2-7B. George Andrews started as a payroll accountant at Portose Herbals, a company with 70 employees. He soon notices that the former payroll accountant had been processing payroll manually and suggests that the company immediately switch to cloud-based payroll. Although the company is switching to an electronic payroll processing system, what types of paper documentation must be maintained in employee records? a. Employers retain physical copies of employees’ time records, pay advice, and any other documentation processed with the paycheck. Some other types of documentation include: Request for a day off; reports of tardiness or absenteeism; detailed records of work completed during that day’s shift. P2-8B. Tara Morris, a payroll clerk, has received a promotion and is now the payroll supervisor for Fligen Enterprises. What document control items could now become her responsibility? a. Payroll system security, Maintenance of paid time off (i.e., vacation, sick, etc.), Access to payroll data, Separation of duties, Training of payroll staff P2-9B. Herman Watkins is in the payroll department of Neombee Plastics, a multistate company. The company has historically been filing employee information with each state. What alternative exists for multistate employers? Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-20 a. Multistate Employer Notification Form allows centralized reporting from the Office of Management and Budget P2-10B. Derek Allen is the payroll supervisor for Caposis Freight. His company is preparing to merge with another distribution company that has a different pay cycle. The president of the company wants to know the difference between biweekly and semimonthly pay cycles as far as pay dates and pay amounts. What should Derektell him? a. Moving between biweekly (26 pay periods per year with the possibility of 27) to a semimonthly system (24 pay periods per year) would cause individual to see increases per pay period since there are more days being covered on the pay period under semimonthly than on biweekly. This would also result in higher taxes per pay period. P2-11B. Complete the W-4 for employment at Equtri Farms located at 8541 Brook Road, Taylorville, IL 62556 with an EIN of 92-6643122, effective 6/17/2020: Linda Ellen Marshall 8924 County Line Road Taylorville, Illinois 62555 SSN: 129-53-2309 Married filing jointly They do not wish to withhold additional amounts. Linda earns $32,000 at her primary job. She has a second job as a delivery driver for Tazio Labs, where she earns $12,000/year. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-21 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-22 P2-12B. Complete the I-9 for employment effective 7/23/2020 at Ecovee Energy located at 244 Winston Drive, Gretna, Virginia 24557. Be sure to complete Section 2. Lloyd Gregory Flowers SSN: 382-10-0392 Date of Birth: 11-20-1993 1298 Chantham Road Gretna, Virginia 24557 U.S. Citizen Lloyd presented his driver’s license and Social Security card to the Human Resources Manager, Amanda Weeble, to review. Virginia Driver’s License #293034293, Expires 11/20/2023 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-23 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-24 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-25 CRITICAL THINKING 2-1. When Omnimia Graphics was looking to implement a payroll accounting system, the manufacturing firm had several options. With only 40 employees, the manual preparation of payroll through spreadsheets and handwritten time cards was a comfortable option for the firm. Another option is to convince the senior management of Omnimia Graphics to implement a software program for payroll processing. How should the company handle the maintenance of the current payroll records? What internal control issues should be addressed? a. Student responses will vary. Key points that need to be included: confidentiality of records, retention period, separation of duties, verification of payroll. 2-2. You have been hired as a consultant for Semiva Productions, a company facing an IRS audit of their accounting records. During your review, you notice anomalies in the payroll system involving overpayments of labor and payments to terminated employees. What would you do? a. When the anomalies are discovered, the management of the company should be made aware of the situation. Since the IRS audit is imminent, documenting the date of the find and attempts to rectify the error would be advisable. Depending upon the nature of the anomalies, the company or payroll employees may have made some serious errors. IN THE REAL WORLD: CASE FOR DISCUSSION Student response will vary. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-26 CONTINUING PAYROLL PROJECT: PREVOSTI FARMS AND SUGARHOUSE Prevosti Farms and Sugarhouse pays its employees according to their job classification. The following employees make up Sugarhouse’s staff: Employee Number Name and Address A-Mille Thomas Millen 1022 Forest School Rd Woodstock, VT 05001 802-478-5055 SSN:031-11-3456 401(k) deduction: 3% Section 125 deduction: $155 A-Towle Avery Towle 4011 Route 100 Plymouth, VT 05102 802-967-5873 SSN:089-74-0974 401(k) deduction: 5% Section 125 deduction: $100 A-Long Charlie Long 242 Benedict Road S. Woodstock, VT 05002 802-429-3846 SSN: 056-23-4593 401(k) deduction: 2% Section 125 deduction: $155 B-Shang Mary Shangraw 1901 Main Street #2 Bridgewater, VT 05520 802-575-5423 SSN: 075-28-8945 401(k) deduction: 3% Section 125 deduction: $100 Payroll information Hire Date: 2-3-2020 DOB: 12-16-1982 Position: Production Manager PT/FT: FT, exempt M/S: Married/Joint Pay Rate: $35,000/year Dependents under 17: 3 Dependents over 17: 1 Step 4 information: none Hire Date: 2-3-2020 DOB: 7-14-1991 Position: Production Worker PT/FT: FT, nonexempt M/S: Single Pay Rate: $12.00/hour Dependents under 17: 0 Dependents over 17: 0 Step 4 information: none Hire Date: 2-3-2020 DOB: 3-16-1987 Position: Production Worker PT/FT: FT, nonexempt M/S: Married/Joint Pay Rate: $12.50/hour Dependents under 17: 2 Dependents over 17: 0 Step 4 information: none Hire Date: 2-3-2020 DOB: 8-20-1994 Position: Administrative Assistant PT/FT: PT, nonexempt M/S: Single Pay Rate: $10.50/hour Dependents under 17: 0 Dependents over 17: 1 Step 4 information: none Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-27 B-Lewis Kristen Lewis 840 Daily Hollow Road Bridgewater, VT 05523 802-390-5572 SSN: 076-39-5673 401(k) deduction: 4% Section 125 deduction: $155 B-Schwa Joel Schwartz 55 Maple Farm Way Woodstock, VT 05534 802-463-9985 SSN: 021-34-9876 401(k) deduction: 5% Section 125 deduction: $100 B-Prevo Toni Prevosti 820 Westminster Road Bridgewater, VT 05520 802-555-3456 SSN: 055-22-0443 401(k) deduction: 6% Section 125 deduction: $155 Hire Date: 2-3-2020 DOB: 4-6-1960 Position: Office Manager PT/FT: FT, exempt M/S: Married/Joint Pay Rate: $32,000/year Dependents under 17: 2 Dependents over 17: 1 Step 4 information: none Hire Date: 2-3-2020 DOB: 5-23-1985 Position: Sales PT/FT: FT, exempt M/S: Married/Joint Pay Rate: $24,000/year base plus 3% commission per case sold Dependents under 17: 2 Dependents over 17: 0 Step 4 information: none Hire Date: 2-3-2020 DOB: 9-18-1967 Position: Owner/President PT/FT: FT, exempt M/S: Married/Joint Pay Rate: $45,000/year Dependents under 17: 3 Dependents over 17: 2 Step 4 information: none The Departments are as follows: Department A: Agricultural Workers Department B: Office Workers 1. You have been hired to start on February 3, 2020, as the new accounting clerk. Your employee number is B-XXXXX, where “B” denotes that you are an office worker and “XXXXX” is the first five letters of your last name. If your last name is fewer than five letters, use the first few letters of your first name to complete the employee number. Your Social Security number is 555-55-5555, and you are full-time, nonexempt, and paid at a rate of $34,000 per year. You have elected to contribute 2 percent of your gross pay to your 401(k) and will have $100 per pay period for Section 125. Complete the W-4 and the I-9 to start your own employee file. You are single with only one job. You live at Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-28 1644 Smitten Road, Woodstock, VT 05001. Your phone number is (555) 555-5555. Your date of birth is 01/01/1991. You will not be claiming anything for section 4 of the W-4. You are a citizen of the United States and provide a Vermont driver’s license #88110009 expiring 01/01/23 in addition to your Social Security card for verification of your identity. Mary Shangraw verified the information for the company. Prevosti Farms and Sugarhouse is located at 820 Westminster Road, Bridgewater, VT, 05520. Prevosti has an EIN of 22-6654454. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-29 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-30 2. Complete the headers of the employee earnings register for each employee. Enter the pay rate for each employee. Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-31 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-32 Copyright © 2021 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education.