Solutions Manual, Appendix 1 1
SOLUTIONS MANUAL
to accompany
Fundamental Accounting Principles
18th Canadian Edition
by Larson/Dieckmann/Harris/Creagh
Complete Solutions Included for all chapters
Vol 2 Chap 9 - 17 + Appx I
Fundamental Accounting Principles 18ce
Copyright Ó 2025
,Solutions Manual, Appendix 1 2
Appendix I Payroll Liabilities
Concept Review Questions
1. Canada Pension Plan deductions are levied on employers, their employees, and the self-
employed. Employees and the self-employed under the age of 18 and over the age of 70
are specifically exempt from the plan.
2. Workers’ Compensation premiums are paid by the employer.
3. Federal employment insurance taxes are paid by nearly all employees and their employers.
Employees pay at the rate of 1.66% of insurable earnings (as of 2024) and the employers
pay 1.4 times the amount deducted from the employees.
4. The employment laws have two main objectives: (1) payment of benefits to unemployed
workers; and (2) stabilization of employees’ incomes.
5. Payroll deductions are remitted to the Receiver General for Canada on the 15th of each
month but can vary depending on the size of the company.
6. An employee’s gross earnings and the amount of their exemptions determine the income
taxes to be withheld from the pay of employees.
7. Tax withholding tables indicate the tax to be withheld from any amount of wages and with
any number of exemptions.
8. Covered self-employed individuals pay Canada Pension Plan deductions of 11.9% of
annual pensionable earnings (as of 2024).
9. Personal information about the employee plus a record of hours worked, gross pay,
deductions, and net pay are accumulated on an employee’s individual earnings record. The
information must be accumulated because payroll laws require its accumulation. The
information: (1) serves as a basis for tax returns and reports, (2) tells when an employee’s
earnings have reached the tax-exempt points for C.P.P., and employment insurance taxes,
and (3) supplies the data for employees’ T-4 Forms.
10. An employer must pay Workers’ Compensation, Canada Pension Plan, and Employment
Insurance premiums.
The amounts which get deducted from the wages of the employee are CPP, Income taxes,
and Employment Insurance.
11. Employee fringe benefits are benefits to employees in addition to wages earned, the cost
of which are paid by the employer. Examples are an employer’s contribution to employee’s
insurance coverage, an employer’s contribution to retirement income programs of
employees, and an employer’s contribution for prescription and/or dental coverage.
Fundamental Accounting Principles 18ce
Copyright Ó 2025
,Solutions Manual, Appendix 1 3
QUICK STUDY
Quick Study A1-1
EI Expense ($260 × 1.4)............................... $364.00
CPP Expense ............................................... 205.00
Total.............................................................. $569.00
Quick Study A1-2
Mar. 31 Wages Expense ................................................. 18,000.00
CPP Payable [($3,000 – $291.67)* × 5.95% × 6] 966.87
EI Payable [($3,000 × 1.66%) × 6] ............... 298.80
Income Taxes Payable ................................. 3,600.00
Wages Payable ............................................ 13,134.33
$3,500 exemption ÷ 12 months = $291.67 exempt
Quick Study A1-3
Mar. 31 Wages Payable .............................................................. 13,134.33
Cash ........................................................................ 13,134.33
To record payment of wages to employees.
Quick Study A1-4
Gross EI Income Total Office Sales
Pay Premium Tax CPP Deductions Net Pay Salaries Salaries
1,200.00 19.92 303.85 67.40 391.17 808.83 1,200.00
530.00 8.80 123.05 27.53 159.38 370.62 530.00
675.00 11.21 156.75 36.16 204.12 470.88 675.00
2,405.00 39.93 583.65 131.09 754.67 1,650.33 530.00 1,875.00
Fundamental Accounting Principles 18ce
Copyright Ó 2025
, Solutions Manual, Appendix 1 4
Quick Study A1-5
Gross EI Income Total Office Sales
Pay Premium Tax CPP Deductions Net Pay Salaries Salaries
2,500.00 41.50 750.00 140.74 932.24 1,567.76 2,500.00
1,800.00 29.88 540.00 99.09 668.97 1,131.03 1,800.00
4,300.00 71.38 1,290.00 239.83 1,601.21 2,698.79 2,500.00 1,800.00
Income tax at 30%; EI is calculated as 1.66% of Gross Wage and CPP is calculated as Gross
Wage less CPP Exemption (3500/26 pay periods for bi-weekly = $134.62), x 5.95%.
Quick Study A1-6
Mar. 31 Wages Expense ($3,500 x 8) ................... 28,000.00
CPP Payable [($3,500 – $291.67)* × 5.95% × 8] 1,527.17
EI Payable [($3,500 × 1.66%) × 8] .. 464.80
Income Tax Payable ($28,000 x 20%) 5,600.00
Salaries Payable .............................. 20,408.03
*$3,500 exemption ÷ 12 months = $291.67 exempt
Fundamental Accounting Principles 18ce
Copyright Ó 2025
SOLUTIONS MANUAL
to accompany
Fundamental Accounting Principles
18th Canadian Edition
by Larson/Dieckmann/Harris/Creagh
Complete Solutions Included for all chapters
Vol 2 Chap 9 - 17 + Appx I
Fundamental Accounting Principles 18ce
Copyright Ó 2025
,Solutions Manual, Appendix 1 2
Appendix I Payroll Liabilities
Concept Review Questions
1. Canada Pension Plan deductions are levied on employers, their employees, and the self-
employed. Employees and the self-employed under the age of 18 and over the age of 70
are specifically exempt from the plan.
2. Workers’ Compensation premiums are paid by the employer.
3. Federal employment insurance taxes are paid by nearly all employees and their employers.
Employees pay at the rate of 1.66% of insurable earnings (as of 2024) and the employers
pay 1.4 times the amount deducted from the employees.
4. The employment laws have two main objectives: (1) payment of benefits to unemployed
workers; and (2) stabilization of employees’ incomes.
5. Payroll deductions are remitted to the Receiver General for Canada on the 15th of each
month but can vary depending on the size of the company.
6. An employee’s gross earnings and the amount of their exemptions determine the income
taxes to be withheld from the pay of employees.
7. Tax withholding tables indicate the tax to be withheld from any amount of wages and with
any number of exemptions.
8. Covered self-employed individuals pay Canada Pension Plan deductions of 11.9% of
annual pensionable earnings (as of 2024).
9. Personal information about the employee plus a record of hours worked, gross pay,
deductions, and net pay are accumulated on an employee’s individual earnings record. The
information must be accumulated because payroll laws require its accumulation. The
information: (1) serves as a basis for tax returns and reports, (2) tells when an employee’s
earnings have reached the tax-exempt points for C.P.P., and employment insurance taxes,
and (3) supplies the data for employees’ T-4 Forms.
10. An employer must pay Workers’ Compensation, Canada Pension Plan, and Employment
Insurance premiums.
The amounts which get deducted from the wages of the employee are CPP, Income taxes,
and Employment Insurance.
11. Employee fringe benefits are benefits to employees in addition to wages earned, the cost
of which are paid by the employer. Examples are an employer’s contribution to employee’s
insurance coverage, an employer’s contribution to retirement income programs of
employees, and an employer’s contribution for prescription and/or dental coverage.
Fundamental Accounting Principles 18ce
Copyright Ó 2025
,Solutions Manual, Appendix 1 3
QUICK STUDY
Quick Study A1-1
EI Expense ($260 × 1.4)............................... $364.00
CPP Expense ............................................... 205.00
Total.............................................................. $569.00
Quick Study A1-2
Mar. 31 Wages Expense ................................................. 18,000.00
CPP Payable [($3,000 – $291.67)* × 5.95% × 6] 966.87
EI Payable [($3,000 × 1.66%) × 6] ............... 298.80
Income Taxes Payable ................................. 3,600.00
Wages Payable ............................................ 13,134.33
$3,500 exemption ÷ 12 months = $291.67 exempt
Quick Study A1-3
Mar. 31 Wages Payable .............................................................. 13,134.33
Cash ........................................................................ 13,134.33
To record payment of wages to employees.
Quick Study A1-4
Gross EI Income Total Office Sales
Pay Premium Tax CPP Deductions Net Pay Salaries Salaries
1,200.00 19.92 303.85 67.40 391.17 808.83 1,200.00
530.00 8.80 123.05 27.53 159.38 370.62 530.00
675.00 11.21 156.75 36.16 204.12 470.88 675.00
2,405.00 39.93 583.65 131.09 754.67 1,650.33 530.00 1,875.00
Fundamental Accounting Principles 18ce
Copyright Ó 2025
, Solutions Manual, Appendix 1 4
Quick Study A1-5
Gross EI Income Total Office Sales
Pay Premium Tax CPP Deductions Net Pay Salaries Salaries
2,500.00 41.50 750.00 140.74 932.24 1,567.76 2,500.00
1,800.00 29.88 540.00 99.09 668.97 1,131.03 1,800.00
4,300.00 71.38 1,290.00 239.83 1,601.21 2,698.79 2,500.00 1,800.00
Income tax at 30%; EI is calculated as 1.66% of Gross Wage and CPP is calculated as Gross
Wage less CPP Exemption (3500/26 pay periods for bi-weekly = $134.62), x 5.95%.
Quick Study A1-6
Mar. 31 Wages Expense ($3,500 x 8) ................... 28,000.00
CPP Payable [($3,500 – $291.67)* × 5.95% × 8] 1,527.17
EI Payable [($3,500 × 1.66%) × 8] .. 464.80
Income Tax Payable ($28,000 x 20%) 5,600.00
Salaries Payable .............................. 20,408.03
*$3,500 exemption ÷ 12 months = $291.67 exempt
Fundamental Accounting Principles 18ce
Copyright Ó 2025
