quickbooks pro 2008 workshop 4 pete s...

QUICKBOOKS PRO 2008

WORKSHOP 4 – PETE’S MARKET

Mini Practice Set ‐ Completing First Quarter Payroll for Pete’s Market

This workshop adds to QuickBooks skills learned in Workshops 1 through 3 so complete those workshops before beginning this one.

In this workshop you prepare paychecks for employees of Pete’s Market and remit payroll taxes to government taxing agencies. You will need to download the Petes Market data file for QuickBooks 2008 from the MyAccountingLab website before beginning this workshop. Refer to the Installing QuickBooks Pro and Student Data Files document for instructions on downloading this file.

What follows is background information on the company. Pete Reel owns Pete’s Market, which is located at 4 Sun Avenue, Swampscott, Massachusetts 01970. The business has three employees who are paid once per month at the end of the month. Paychecks are printed out of the payroll checking account and funds are then transferred from the cash account to the payroll cash checking account.

We will be relying on the following information to compute employee tax withholdings and employer payroll tax liabilities.

1. OASDI and Medicare Taxes (i.e., together called FICA)

a) OASDI (Social Security)

i) Employees must withhold 6.2 percent of the first $102,000 in gross wages paid each per year.

ii) Pete’s must pay employer taxes at the same rate as employees.

b) Medicare Taxes

i) Employees must withhold 1.45 percent of annual gross wages.

ii) Pete’s must pay employer taxes at the same rate as employees.

QuickBooks Pro 2008 Workshop 4 – Pete’s Market

2. Federal Income Tax (FIT)

a) Employee withholdings for federal income taxes are calculated by referring to tables provided by the IRS in Circular E. These tables are updated each year and we will be using the Circular E monthly payroll table that follows.

The IRS has two distinct methods of calculating employee income tax withholdings. The first method incorporates a series of tables that you select based on marital status and pay frequency. You then withhold the tax amount that appears at the intersection of an employee’s wage bracket along with the number of claimed exemptions. These tables are illustrated in the text.

The second method uses percentage based tables. These tables are also chosen by marital status and pay frequency but tax is calculated as a percentage based on pay bracket. The pay bracket is determined after subtracting from gross wages an amount for each withholding allowance claimed by the employee.


3. State Income Tax (SIT)

a) Employee state income tax withholdings are calculated similar to federal income tax withholdings. Tables for withholding these taxes are already built into the tax table supplied with the data file.


4. State Unemployment Taxes (SUTA)

a) Pete’s pays an employer tax of 4.9 percent of the first $10,800 in gross wages paid to each employee per year.

5. Federal Unemployment Taxes (FUTA)

a) Pete’s pays an employer tax of 0.8 percent of the first $7,000 in gross wages paid to each employee per year.

The Payroll module in QuickBooks integrates with the General Ledger module so that payroll transactions are automatically recorded in the Payroll Journal and general ledger accounts. In addition, employee earnings and withholding records are automatically updated. You will not be asked to print Form 941 but the software can print this report if you subscribe to the payroll tax table updates.

The following lists the employees of Pete’s Market along with their monthly gross wages for the first payroll quarter. All employees claim the single filing status with zero allowances.

January February March

Fred Flynn $2,500 $2,590 $3,100

Lilly Vron 3,200 3,400 4,260

Mary Jones 3,000 3,000 4,000

The trial balance for Pete’s Market at 1/1/08 appears next.

Debits Credits

1010 Cash 84,964.04 ⎯ 1020 Payroll Checking Cash ⎯ ⎯ 2310 FIT Payable ⎯ 1,415.94

2320 SIT Payable ⎯ 535.50

2330 Social Security Tax Payable ⎯ 1,116.00

2335 Medicare Tax Payable ⎯ 261.00

2340 FUTA Payable ⎯ 48.00

2350 SUTA Payable ⎯ 1,587.60

3560 Pete Reel, Capital ⎯ 80,000.00

84,964.04 84,964.04


Open the Company Data File

1. Begin by opening QuickBooks and then open the company data file named Petes Market.

Add Your Name to the company Name

2. Click Company on the main menu and select Company Information. Add your name to the end of the company name as illustrated in previous workshops. Remember to click OK to store your changes.

Pay December Payroll Liabilities

3. You begin transactions by paying the following payroll liabilities.

2008

Jan. 15 Social Security, Medicare, and FIT taxes for December 2007.

15 SIT tax withholdings for December 2007.

15 SUTA taxes for the fourth quarter of 2007.

15 FUTA taxes for the fourth quarter of 2007.

4. Click this icon in the Employees section of the Home page. (Note: If prompted to sign up for payroll, click No.)

5. Enter the date range of “12/31/07” to “12/31/07” and click OK.

6. Verify that To be printed is marked.

7. Keep 1010 Cash as the Bank Account and enter “1/15/08” as the Check Date.

8. Select the option to Create liability check without reviewing.

9. Finally, click the checkbox on each Payroll Item to select it for payment. The completed window is illustrated next. The amount to be paid (i.e., 4,964.04) appears at the bottom.


10. Click Create.

11. You have only created bills for these taxes. We will now print the checks.

12. Click this icon under the Banking section of the Home page.

13. Keep “1” as the First Check Number and the window appears as follows.


14. Click OK. Choose a printer and click Print.

15. When the Print Checks – Confirmation window opens. click OK to complete the process.

16. You are now ready to create employee paychecks for January 31, 2008. Because you do not subscribe to QuickBooks’ payroll tax service, you will need to manually enter employer and employee taxes on these paychecks.

Create Paychecks

17. Begin by clicking this icon on the Employees section of the Home page. (Note: If prompted to sign up for payroll, click No.)

18. Enter the Pay Period Ends date as “1/31/08” and the Check Date as “1/31/08”.

19. Notice that these checks will credit Bank Account 1020 Payroll Checking.

20. Click Check All to mark every employee to receive a paycheck. The completed window is illustrated next.


Enter Paycheck Details

21. Click Continue and you will now manually enter payroll tax information.

22. Click Fred Flynn to open his paycheck details. Enter the tax information as follows.


23. Click Save & Next and enter the following information for Lilly Vron.


24. Click Save & Next and enter the following information for Mary Jones.


25. Click Save & Close to return to the Enter Payroll Information window and then click Continue.

26. The window illustrated next displays payroll totals across the bottom. Verify your totals.


27. Click Create Paychecks.

28. Click Print Paychecks and enter the first check number of “103” as illustrated next. (Note: These check numbers differ from the payroll liability checks because these checks are out of a different bank account.)

Print Paychecks


29. Click OK. Choose a printer and click Print.

30. When the Print Checks ‐ Confirmation window appears, click OK.

31. Return to the Confirmation and Next Steps window and click Close.

32. You will now display the employee earnings report. Using the menu, click Reports and point to Employees & Payroll to select Employee Earnings Summary.

Displaying and Printing the Employee Earnings Report

33. Enter the date range of “1/31/08”. Resize the columns and the report appears as illustrated next. This report shows gross payroll along with employee and employer payroll taxes. Close the report.


34. You will now print a report listing the paychecks that were printed. Click Reports and point to Employees & Payroll to select Payroll Transactions by Payee.

Displaying and Printing Payroll Transactions by Payee 35. Enter the date range of “1/31/08” and the report appears as

illustrated next. Close the report.

36. You will now post a bank transfer from the 1010 Cash account into the 1020 Payroll Checking Cash account to cover the net pay amount listed on the previous report.

Make a Bank Transfer

37. Click Banking on the main menu and select Transfer Funds. Enter the transfer as follows.


38. Click Save & Close to post the transaction.

Print Reports 39. Using the Reports Center, print the following January reports to document transactions.

a. Check Detail (Note: This report is listed under Banking reports.)

b. Trial Balance (Check figure = $83,431.01)

40. Create a backup file that includes the name of the company. Backup procedures were illustrated in previous workshops and instructions are also found in the Backing Up and Restoring Your Work in QuickBooks document located on the MyAccountingLab website.

Backup January Transactions

41. Click Company on the main menu and select Set Closing Date.

42. Click the Set Date/Password button and change the date to “1/31/2008”. Click OK and then click OK.

Close the Accounting Period


43. Pay the following payroll tax liabilities for the date range of “1/1/2008” to “1/31/2008”. Refer back to Step 3 for more details on the process. Checks are printed on February 15, 2008, using first check number “4” and credit the 1010 Cash account.

Pay January Payroll Liabilities

Social Security, Medicare, and FIT liabilities for January payroll

$2,495.10

SIT liabilities for January payroll $440.01

44. Create paychecks for the pay period ended February 29, 2008 using the following information. Also print these checks on February 29, 2008. Notice that gross pay for Fred and Lilly has increased this month so you will need to enter the new gross amount when entering the tax information.

Record February Payroll Transactions

Emp. Gross

FIT

Soc. Sec.

Medicare

SIT

Emp. Net

FUTA

SUTA

Fred Flynn $2,590 323.50 160.58 37.56 128.07 1,940.29 20.72 126.91

Lilly Vron $3,400 502.00 210.80 49.30 176.67 2,461.23 27.20 166.60

Mary Jones $3,000 402.00 186.00 43.50 152.67 2,215.83 24.00 147.00

45. After entering the paychecks, the Review and Create Paychecks window displays the following totals.


46. Print these paychecks on starting check number 106.

47. Print the Payroll Transactions by Payee report for February 29, 2008. (Check figure for net pay = $6,617.35)

48. Transfer the net pay amount from the cash account into the payroll checking cash account.

49. Print the following reports for February.

a. Check Detail


Print Reports

50. Create a backup file that includes the name of the company and add to the name to prevent overwriting the previous backup file.

Backup February Transactions


51. Close the accounting period by setting the closing date to “2/29/08”.

Close the Accounting Period

52. Pay the following payroll tax liabilities for the date range of “1/1/2008” to “2/29/2008”. Checks are printed on March 15, 2008, using first check number “6” and credit the 1010 Cash account.

Pay February Payroll Liabilities

Social Security, Medicare, and FIT liabilities for February payroll

$2,602.98

SIT liabilities for February payroll $457.41

53. Create paychecks for the pay period ended March 31, 2008 using the following information.

Record March Payroll Transactions

Emp. Gross

FIT

Soc. Sec.

Medicare

SIT

Emp. Net

FUTA

SUTA

Fred Flynn $3,100 427.00 192.20 44.95 158.67 2,277.18 15.28 151.90

Lilly Vron $4,260 717.00 264.12 61.77 228.27 2,988.84 3.20 205.80

Mary Jones $4,000 652.00 248.00 58.00 212.67 2,829.33 8.00 196.00

54. After entering the paychecks, the Review and Create Paychecks window displays the following totals.


55. Print these paychecks on starting check number 109.

56. Print the Payroll Transactions by Payee report for March 31, 2008. (Check figure for net pay = $8,095.35)

57. Transfer the net pay amount from the cash account into the payroll checking cash account.

58. Print the following March reports.

a. Check Detail


Print Reports

Backup March Transactions 59. Make a backup file.

QuickBooks Pro 2008 Workshop 4 – Pete’s Market Close the Accounting Period

60. Close the accounting period by setting the period end date to “3/31/08”

61. Pay the following payroll tax liabilities for the date range of “1/1/2008” to “3/31/2008”. Checks are printed on April 15, 2008, using first check number “8” and credit the 1010 Cash account.

Record Payment of March Payroll Liabilities

Social Security, Medicare, and FIT liabilities for March payroll

$3,534.08

SIT liabilities for March payroll $599.61

FUTA liabilities for first quarter $168.00

SUTA liabilities for first quarter $1,420.51

62. Print the following April reports.

a. Check Detail


Print Reports

63. You have now completed the workshop so back up your work. Backup Your Work and Exit

64. You can now exit the software.

quickbooks pro 2008 workshop 4 pete s...

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