Complete payroll for the last month (December) of the fourth quarter (Q4) of 2016, which consists of the final two pay periods of the year.

Wayland Custom Woodworking is a firm that manufactures custom cabinets and woodwork for business and residential customers. Students will have the opportunity to establish payroll records and to complete a month of payroll information for Wayland. Wayland Custom Woodworking is located at 1716 Nichol Street, Logan, Utah, 84321, phone number 435-555-9877. The owner is Mark Wayland. Wayland’s EIN is 91-7444533, and the Utah Employer Account Number is 999-9290-1. Wayland has determined it will pay their employees on a semimonthly basis. Federal income tax should be computed using the percentage method.

 

For Part 1 of this project, you will complete payroll for the last month (December) of the fourth quarter (Q4) of 2016, which consists of the final two pay periods of the year.  Once payroll has been completed for the fourth quarter, you will then file the annual tax forms for Wayland as well as prepare each employee’s Form W-2 in Part 2.

 

The SUTA (UI) rate for Wayland Custom Woodworking is 2.6% on the first $32,200. The state withholding rate is 5.0% for all income levels and marital statuses, which will be used in computing Utah withholding tax for each employee using the tax tables provided below.

 

Rounding can create a challenge. For this project, the hourly rate for the individuals should be rounded to five decimal places. So take their salary and divide by 2,080 (52 weeks at 40 hours per week) for all full time employees, both exempt and nonexempt. For nonexempt employees, such as Stevon Varden, Varden’s salary is $42,000 and is a nonexempt employee, so the calculation will be $42,000/2,080, which would give you $20.19231 per hour, and use this to compute the employee’s gross pay based on the number of hours worked.  When a nonexempt employee has worked overtime hours for a given pay period, take their regular hourly rate and multiply it by 1.5, round the result to 5 decimal places, and multiply the new rate by their number of overtime hours.

 

For exempt employees, such as Anthony Chinson, an hourly rate rounded to five decimal places should be determined using the same method shown above, but gross pay should be determined by taking the exempt employee’s yearly salary and dividing it by 24, which is the number of payroll periods with a semimonthly frequency.  For example, Chinson’s salary is $24,000 and is a full time employee.  Chinson’s hourly rate is $11.53846(determined by taking $24,000/2,080), but as he is an exempt employee, the calculation for his gross pay will be $24,000/24, which would give you $1,000.  For pay periods that include paid holidays, ensure to distribute an exempt employee’s regular pay accordingly to holiday pay based on the number of hours that consist of the holidays for that period.

 

Employees are paid for the following holidays occurring during the final quarter:

· Thanksgiving day and the day after, Thursday and Friday November 24-25

· Christmas, which is a Sunday. When holidays occur on a weekend, the preceding Friday, December 23, is considered a holiday. Employees receive holiday pay for Monday, December 26.

 

For the completion of this project, refer to the tax-related information in the table below.  For federal withholding calculations, use the percentage method tables in Appendix C, which is provided below. For Utah state withholding calculations, use the Utah Schedule 3 tax tables linked below (ensure to use the appropriate Utah table based on each employee’s marital status). Both 401(k) and insurance are pretax for federal income tax and Utah income tax.

   
Federal Withholding Allowance (less 401(k), Section 125) $168.80 per allowance claimed
Semimonthly Federal Percentage Method Tax Table Appendix C Page 254 Table #3
Federal Unemployment Rate (employer only) (less Section 125) 0.6% on the first $7,000 of wages
State Withholding Rate (less 401(k), Section 125) See Utah Schedule 3, Table 1 or use the Excel Version of Schedule 3
State Unemployment Rate (employer only) (less Section 125) 2.6% on the first $32,200 of wages

 

The balance sheet for WCW as of November 30, 2016, is as follows:

Wayland Custom Woodworking Balance Sheet 11/30/2016
Assets   Liabilities & Equity
Cash $ 1,086,269.51   Accounts Payable $ 150,230.89
Supplies   10,283.15   Salaries and Wages Payable   10,319.19
Office Equipment   130,202.16   Federal Unemployment Tax Payable   1,920.92
Inventory   221,163.81   Social Security Tax Payable   3,219.22
Vehicle   25,000.00   Medicare Tax Payable   752.88
Accumulated Depreciation, Vehicle   (1,420.00)   Federal Unemployment Tax Payable   92.32
Building   164,000.00   State Unemployment Tax Payable   674.99
Accumulated Depreciation, Building   (3,221.00)   Employee State Income Tax Payable   1,088.86
Land   35,750.00   401(k) Contributions Payable   1,018.66
Total Assets   1,668,027.63   Employee Medical Premiums Payable   750.00
        Notes Payable   211,000.00
        Utilities Payable   2,825.43
        Total Liabilities   383,893.36
        Owners’ Equity   1,250,000.00
        Retained Earnings   34,134.27
        Total Equity   1,284,134.27
        Total Liabilities and Equity   1,668,027.63
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