1, illustrstion: assume XYZ is a governmental agency organized to render public service . It has the following data related to its employees whos salaries are paid according to Ethiopian calender month of yekatit 2012 E,C.
Id no name of employees basic salary
01, aregash shew birr 12000
02, paulos chala 6.020
03, mommahed abdu 7350
04,Tensay belay 11,470
05, Haile garba 4950
Transportation
Allowances
2900
25% of his salary
Over time
1500
20% of her salary
600
worked(hour)
21
8
15
_
6
Duration of over
Time worked
Up to 10:00 p.m
Weekend
Rest day
_
Public holidays
Additional information
. The mamagement of the agency expects the employees to work 160 hour in a month of yekatit.
. There were abseents during the month .
. All employees are permanent except tensay and haile.
. Mohammed agreed to contribute monthly birr 400 and 200 from his salary as saving in the credit association and as a donation to the homeless children's respectively .
haile agreed to donate monthly birr 100 from his monthly salary as aid to orphans childrens.
. The company agreed to contribute 17% of the salary as pension contribution for each employees.
Required
A, prepare a payroll registor(sheet) for the agency for the month of yekatit 2013 E,C.
B, record the payment of salary as of yekatit 30,2012 E,C using check stub No.0123.
C, recognition of payroll tax expense/ with holding taxes on yekatit 30.
D, record the payment of the claim of the credit association of thier agency on megabit 1, 2012 E,C using check stub No 0124.
E, record the payment of dunations on megabit 3, 2012 E,C .
F, record the payment of he with holding tax and pension contribution to the concerned government body on megabit 7,2012 E,C.
Solve this question and answers and more explanations?
.
A, To prepare a payroll register for the agency for the month of yekatit 2013 E,C, we need to calculate the various components of the employees' salaries based on the given information.
1. Aregash Shew:
- Basic salary: Birr 12,000
- Transportation Allowance: Birr 2,900 (25% of basic salary)
- Overtime: Birr 1,500 (20% of basic salary)
- Total hours worked: 21
- Net pay: Basic salary + Transportation Allowance + Overtime = Birr 12,000 + Birr 2,900 + Birr 1,500 = Birr 16,400
2. Paulos Chala:
- Basic salary: Birr 6,020
- Transportation Allowance: Birr 0 (not eligible for transportation allowance)
- Overtime: Birr 1,204 (20% of basic salary)
- Total hours worked: 8
- Net pay: Basic salary + Overtime = Birr 6,020 + Birr 1,204 = Birr 7,224
3. Mohammed Abdu:
- Basic salary: Birr 7,350
- Transportation Allowance: Birr 1,837.5 (25% of basic salary)
- Overtime: Birr 1,470 (20% of basic salary)
- Total hours worked: 15
- Net pay: Basic salary + Transportation Allowance + Overtime = Birr 7,350 + Birr 1,837.5 + Birr 1,470 = Birr 10,657.5
4. Tensay Belay:
- Basic salary: Birr 11,470
- Transportation Allowance: Birr 2,867.50 (25% of basic salary)
- Overtime: Birr 2,294 (20% of basic salary)
- Total hours worked: -
- Net pay: Basic salary + Transportation Allowance + Overtime = Birr 11,470 + Birr 2,867.50 + Birr 2,294 = Birr 16,631.50
5. Haile Garba:
- Basic salary: Birr 4,950
- Transportation Allowance: Birr 0 (not eligible for transportation allowance)
- Overtime: Birr 990 (20% of basic salary)
- Total hours worked: 6
- Net pay: Basic salary + Overtime = Birr 4,950 + Birr 990 = Birr 5,940
Based on the above calculations, the payroll register for the agency for the month of yekatit 2013 E,C would look like this:
| ID No | Name | Basic Salary | Transport Allowance | Overtime | Net Pay |
|-------|-----------------|--------------|---------------------|----------|-----------|
| 01 | Aregash Shew | Birr 12,000 | Birr 2,900 | Birr 1,500| Birr 16,400|
| 02 | Paulos Chala | Birr 6,020 | Birr 0 | Birr 1,204| Birr 7,224 |
| 03 | Mohammed Abdu | Birr 7,350 | Birr 1,837.5 | Birr 1,470| Birr 10,657.5|
| 04 | Tensay Belay | Birr 11,470 | Birr 2,867.50 | Birr 2,294| Birr 16,631.5|
| 05 | Haile Garba | Birr 4,950 | Birr 0 | Birr 990 | Birr 5,940 |
B, To record the payment of salary as of yekatit 30, 2012 E,C using check stub No. 0123, we need to prepare individual check stubs for each employee with the following information:
Check stub No. 0123
Pay date: yekatit 30, 2012 E,C
1. Aregash Shew:
- Basic salary: Birr 12,000
- Transportation Allowance: Birr 2,900
- Overtime: Birr 1,500
- Gross pay: Basic salary + Transportation Allowance + Overtime = Birr 12,000 + Birr 2,900 + Birr 1,500 = Birr 16,400
- Deductions:
- Pension contribution: 17% of gross pay = 17% of Birr 16,400 = Birr 2,788
- Credit association contribution: Birr 400
- Donation to homeless children: Birr 200
- Net pay: Gross pay - Deductions = Birr 16,400 - Birr 2,788 - Birr 400 - Birr 200 = Birr 13,012
2. Paulos Chala:
- Basic salary: Birr 6,020
- Overtime: Birr 1,204
- Gross pay: Basic salary + Overtime = Birr 6,020 + Birr 1,204 = Birr 7,224
- Deductions:
- Pension contribution: 17% of gross pay = 17% of Birr 7,224 = Birr 1,229.68
- Net pay: Gross pay - Deductions = Birr 7,224 - Birr 1,229.68 = Birr 5,994.32
3. Mohammed Abdu:
- Basic salary: Birr 7,350
- Transportation Allowance: Birr 1,837.5
- Overtime: Birr 1,470
- Gross pay: Basic salary + Transportation Allowance + Overtime = Birr 7,350 + Birr 1,837.5 + Birr 1,470 = Birr 10,657.5
- Deductions:
- Pension contribution: 17% of gross pay = 17% of Birr 10,657.5 = Birr 1,810.58
- Credit association contribution: Birr 400
- Donation to homeless children: Birr 200
- Net pay: Gross pay - Deductions = Birr 10,657.5 - Birr 1,810.58 - Birr 400 - Birr 200 = Birr 8,246.92
4. Tensay Belay:
- Basic salary: Birr 11,470
- Transportation Allowance: Birr 2,867.50
- Overtime: Birr 2,294
- Gross pay: Basic salary + Transportation Allowance + Overtime = Birr 11,470 + Birr 2,867.50 + Birr 2,294 = Birr 16,631.50
- Deductions:
- Pension contribution: 17% of gross pay = 17% of Birr 16,631.50 = Birr 2,827.45
- Net pay: Gross pay - Deductions = Birr 16,631.50 - Birr 2,827.45 = Birr 13,804.05
5. Haile Garba:
- Basic salary: Birr 4,950
- Overtime: Birr 990
- Gross pay: Basic salary + Overtime = Birr 4,950 + Birr 990 = Birr 5,940
- Deductions:
- Pension contribution: 17% of gross pay = 17% of Birr 5,940 = Birr 1,009.80
- Donation to orphans: Birr 100
- Net pay: Gross pay - Deductions = Birr 5,940 - Birr 1,009.80 - Birr 100 = Birr 4,830.20
To record the payment of salary, we would debit the salary expense account and credit the cash account for the total net pay amount.
C, To recognize payroll tax expense/withholding taxes on yekatit 30, we need to calculate the withholding tax based on the employees' salaries. The withholding tax rate in Ethiopia may vary, so we will assume a 15% withholding tax rate for this calculation.
1. Aregash Shew:
- Net pay: Birr 13,012
- Withholding tax: 15% of net pay = 0.15 * Birr 13,012 = Birr 1,951.80
2. Paulos Chala:
- Net pay: Birr 5,994.32
- Withholding tax: 15% of net pay = 0.15 * Birr 5,994.32 = Birr 899.15
3. Mohammed Abdu:
- Net pay: Birr 8,246.92
- Withholding tax: 15% of net pay = 0.15 * Birr 8,246.92 = Birr 1,237.04
4. Tensay Belay:
- Net pay: Birr 13,804.05
- Withholding tax: 15% of net pay = 0.15 * Birr 13,804.05 = Birr 2,070.61
5. Haile Garba:
- Net pay: Birr 4,830.20
- Withholding tax: 15% of net pay = 0.15 * Birr 4,830.20 = Birr 724.53
To record the payroll tax expense, we would debit the tax expense account and credit the withholding tax liability account for the total withholding tax amount.
D, To record the payment of the claim of the credit association of their agency on megabit 1, we would debit the credit association payment expense account and credit the cash account for the amount of Birr 400.
E, To record the payment of donations on megabit 3, we would debit the donation expense account and credit the cash account for the total donation amount.
For Mohammed Abdu:
- Debit the donation expense account and credit the cash account for Birr 200.
For Haile Garba:
- Debit the donation expense account and credit the cash account for Birr 100.
F, To record the payment of withholding tax and pension contributions to the concerned government body on megabit 7, we would debit the tax liability account and pension contribution expense account, and credit the cash account for the total amounts.
For withholding tax:
- Debit the tax liability account and credit the cash account for the total withholding tax amount calculated in part C.
For pension contribution:
- Debit the pension contribution expense account and credit the cash account for the total pension contribution amount.