 Accounting practice problem. Pay employees month one. Get ready because we're going to excel. Here we are in our Excel worksheet in prior presentations. We put together the Excel worksheet from a blank sheet. Now we're entering transactions into it. If you have access to it, there's two tabs on down below. The example tab and the practice tab. The practice tab starting out where we left off in the last presentation. The example tab in essence being an answer key. Let's take a look at it now. We're going to be then entering a payroll transaction, which will look something like this. But before we can, we're going to basically make a register, which is going to be all the way to the right here, which is going to be our focus this time. And then we'll use this register in order to enter the journal entries related to the payroll transactions. Let's go to the practice tab. Within the practice tab, we're going to do some cleanup work. First, we're going to be hiding some cells on the left hand side. So I'm going to be hiding from the skinny column all the way to the left. I'm going to right click on the skinny column and hide those items, hiding them. We're going to copy the ending balances over here and right click and copy them so we can pull them into our beginning balances, right click and pasting them. One, two, three, delete the transactions in the middle so that we can focus in on where we want to be, which is going to be our transactions that will be the payroll transactions. But before we do, we're going to create a payroll register to pull the information from. So we'll put the payroll register all the way to the right here. So it's going to be all the way to the right. And we're going to put it between this, this ledger and the balance sheet. So I want to put it right in between here. So I'm going to put my cursor on the skinny. I'm going to add some cells going over to the EY, right click and insert some cells. I'm going to clear the formatting on them getting the formatting rid of that. And then I'm going to basically put my cursor on the skinny and format paintbrush the skinny column and put that over here. I want to reformat these cells to what I would like to see it as in this table, right clicking on them format those cells. I'm going to make them currency brackets with the red and no decimals and okay. So we're basically going to make a kind of a payroll register here that we can use to build our journal entry imagining we're paying to employees those two employees Adam Hamilton and Eric Smith. So let's make this one a little bit larger the cell. And we're going to call this a payroll ledger, which I'll put down here. I'll put the headers foot first payroll ledger. I'm going to make these all bold to make everything bold. Make everything bold. I only work bold. I'm a bold worker. Super bold. Gross pay. Notice I'm not going to use the alignment tab over or the wrapping. I'm going to put two different rows when I need two different rows here so that I don't make it like a wide row that might mess things up to the left and the right. If you're not inserting a table, I think that's the better way to go oftentimes the FIT federal income tax. We're gonna have social security social that's not how you spell it social you could read it couldn't you you knew what it meant security Medicare Medicare and then net income okay and then let's do some bolding over here do some formatting alignment let's make this centered let's make it black and white for our header let's make this one black and white too and then we're going to have our two employees which are going to be Adam Hamilton I'm not sure if that's how you spell it but that's going to be it then we're going to say how much he gets paid on a monthly basis so we're going to assume we're paying monthly remember your payroll periods could be monthly weekly semi monthly bi-weekly or the common payroll periods and so we're going to say monthly here to go with so we don't have to run payroll multiple different times in our practice problem and we're going to say that he gets paid salary of 4583 so we're going to say 4583 on the salary pay and then we got to think about what the withholdings will be so we got FIT social security and Medicare these are just going to be the federal withholdings note you could have other obviously you probably would have other withholdings as well depending on the state that you're in local withholdings you could have union dues and whatnot and then you could have voluntary types of withholdings which could be things like the 401k plan health care plans and so on and so forth we're going to stick to just the federal income tax withholdings or the federal withholdings which are going to be the mandatory or required types of withholdings the FIT meaning federal income tax not our tax that we pay as the employer as the company but the employees tax the one that they ultimately will pay you know on their 1040 or report on the 1040 but we're going to be doing the withholding for them for that that tax is a progressive tax quite a complex tax so we can't just do a flat calculation for it we'd have to use the W for and then the W for would tell us all the stuff they would be based on the marital status and so on and extra exemptions and whatnot then we'd have to use a table to figure it out and software is quite useful with regards to the FIT given the fact that it is quite complicated so we're not going to we're not going to get into the detail on that I'm just going to say it was 720 we're going to assume we get that from the software from the from the W for and so on and so forth the social security is a bit more flat of a tax so I could say this is typically going to be equal to the gross pay times point 0.062 now that could change like to increase later on the tax but at least it's kind of flat although again it does have a cap on it at some point in time so if the income goes over a certain threshold and there's a cap so it does get quite complicated payroll also gets quite complicated due to the fact that you have to report this on a period by period basis as well as a year to date basis on the pay stub you also have the reporting requirements that you have to it and whenever you have a cap on something then you have to know when that cap is applied in which period software is really useful to do this the manual payroll gets a lot more difficult given the fact that no one individual part of payroll is really difficult but when you put all the things that they want you to do together you have a complex system right you now have something that's kind of this is now complex just due to the many moving parts so then the Medicare is usually going to be a more of a flat tax too it's usually going to be the employee portion the gross pay times point one oh one four five but we kind of messed it up in one of our practice problems that we want to line this one up too so I'm going to mess this one up in the same way I'm going to double click on it and we put an extra zero here I believe to make it seven that's not going to mess up anything because it's just a practice problem here because we're not getting exact on what the actual taxes are but realize that one should be more of a flat tax it should be an easier one to calculate generally as well if I go then to the Erica Erica it's going to be our other employee she's going to make 2400 the FIT once again we're going to assume we get from the W four which we're going to say is 360 and then we're going to say the social security is going to be the equal to the 2400 times the point 06 2 and then the Medicare we're going to say is equal to the 2400 times the point 0145 so that means that they're going to get they earned for example Adam earned 4583 but then they're going to be taking from them we will take from them or we will never give them in other words we will withhold part of their earnings not because we get to keep it but because we have to pay it on their behalf in theory to the government these amounts FIT social security and Medicare so you can calculate this this way you could say I want that 4583 gross pay minus the FIT federal income tax minus the social security minus the 7 Medicare or I could do it this way for Erica for example equals this number minus the sum this is a more elegant calculation this is a little bit more impressive minus the sum of these three closing it up same thing so that means that each employee this employee Erica is going to earn 2400 even though she didn't get these three amounts but only got 1856 because we had to keep these three amounts not because we get to keep it forever but because we need to pay it on Erica's behalf because we're forced to buy the government to be their