Schlitz Brewing is a proprietorship established in 2010 and operated by Sunny Schlitz. She has grown the
Question:
Schlitz Brewing is a proprietorship established in 2010 and operated by Sunny Schlitz. She has grown the business over the past 10 years and now has two full time employees. Schlitz Brewing is located at 123 Marzen Street in Victoria, V8V 1W1, and the business number is 50057 4399. Sunny’s SIN number is 527 000 508.
It is now February 2021 and you are a second-year accounting student who has been hired by Sunny to complete the T4s for the 2020 tax year. Schlitz Brewing has only one payroll account. Sunny completed the payroll herself during the year, but needs assistance with the T4s as she is unsure how to enter the taxable benefits into the form. Sunny provides you with the following information about her employees:
Komiko Kolsch
Komiko Kolsch (SIN 123 456 783) is her general manager and senior consultant and earns a salary of $137,500 per year. Komiko lives at 852 Frothy Head Road in Victoria V8V 2W2.
In addition to the salary, Schlitz Brewing paid for a term life insurance policy at $3,000 per year. A couple of years ago, Komiko negotiated that Schlitz Brewing would also make employer contributions to a registered pension plan for Komiko (Plan #1234567). Both Komiko and Schlitz Brewing contributed $7,500 each in 2020 to the plan. Sunny informs you that the pension adjustment to be recorded this year is $15,000.
Schlitz Brewing also pays the professional dues for Komiko, the dues paid in 2020 were $1,300. Tax deducted from Komiko’s paycheques during the year was $37,320.
Manjeet Tamboli
The other employee Manjeet Porter (SIN 222 333 443) is a consultant and was paid a salary of $81,000 and had $27,955 in income tax deducted from his paycheque. Manjeet lives at 999 Gose Street in Victoria V8V 0X0.
Manjeet does not pay into the pension plan, nor does he have any professional dues. Schlitz Brewing supplied a vehicle for employees Manjeet to use. The vehicle originally cost $74,000. Manjeet drove the vehicle 41,930 kilometres during the year, 23,000 of which were personal. Manjeet had $9,000 taken off of his paycheque during the year to partially pay back operating expenses.
On May 1, 2020, Manjeet approached Sunny for an employee loan. Schlitz Brewing gave him $30,000 and he is paying interest to the business at 1.5% per year. You have checked and the CRA prescribed rate for each quarter of the year was 3% (use number of days in your calculation for the loan interest benefit, there are 366 days in 2020).
Other Notes:
Both employees had the maximum CPP and EI withheld from their paycheques. For the 2020 year, that information is as follows:
CPP EI
Maximum Earnings $58,700 $54,200
Maximum Withholdings 2,898 856.36
As well as a $12,000 Christmas bonus (already included in the gross payroll amounts noted), Schlitz Brewing gave Christmas gifts to all employees. Komiko received a $2,500 BC Liquor Store gift card and Manjeet received a set of crystal glassware valued at $400. Both Manjeet and Komiko are required under contract to travel to locations that were not their normal place of business to perform their employment duties. Komiko likes to use her own vehicle and therefore receives an automobile allowance of $575 per month instead. Komiko is not required to be away from the municipality for more than 12 hours. She is responsible for paying her own operating expenses for her vehicle. Sunny remitted $76,900 in payroll remittances for 2020. Sunny has indicated she prefer you were the contact person for any questions from CRA with respect to the payroll. The office contact number is 250-555-1212.
Required:
1. Using the information to
prepare one T4 for each of the employees.
Auditing and Assurance Services A Systematic Approach
ISBN: 978-1259162343
9th edition
Authors: William Messier, Steven Glover, Douglas Prawitt