Payroll Canadian 1st Edition Dryden

Solutions Manual
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Chapter 6
Dryden: An Introduction to Canadian Payroll
Administration 1e

Solutions to Questions

Review Questions:
6-1 The steps are outlined in Exhibit 6-1: Pay Cycle Process Steps:
1. Gather all information for the payroll processing.
• Static information for employee
• Pay Cycle specific data for employee
2. Calculate taxable benefit amounts needed for calculation of
pensionable and taxable income.
3. Calculate Gross Earnings.
• Wages/salaries, taxable allowances, non-taxable allowances
4. Calculate Pensionable Earnings.
• Gross Earnings less non-taxable allowances less
termination payments plus taxable benefits
5. Calculate Insurable Earnings.
• Gross Earnings less non-taxable allowances less
termination payments
6. Calculate Canada Pension Plan Contributions
• Pensionable Earnings less pay cycle exemption times 4.95%
7. Calculate Employment Insurance Premiums
• Insurable Earnings time 1.88%.
8. Calculate Gross Taxable Earnings
• Gross Earnings less non-taxable allowances plus taxable
benefits.
9. Calculate Net Taxable Earnings
• Gross Taxable Earnings less employee deductions for
Registered Pension Plan, Registered Retirement Savings
Plans, Union dues and less any personal exemption for
living in a prescribed zone less any other Canada Revenue
Agency approved amounts
10. Calculate Federal Income Tax from tables or PDOC
11. Calculate Provincial Income Tax from tables or PDOC.
Dryden 1e: Solutions Manual Chapter 6
©2016 McGraw-Hill Education. All Rights Reserved.
1
 12. Calculate Total deductions.
13. Calculate Net Pay.

6-2 All earnings, allowances, benefits and deductions need to be converted

to the appropriate pay cycle so that the calculation of net pay is correct
for the pay period.

6-3 Employee static information provides us with all of the necessary

information to calculate their net pay. The employee pay period
information will provide us with the specific information for this
particular pay that is an exception from the static, or provides specific
amounts to be used to calculate earnings and deductions for this cycle
only.

6-4 An employee in Quebec will be impacted as follows:

 Quebec Pension Plan contributions will be calculated rather than
Canada Pension Plan
 Employment Insurance is calculated at a reduced rate
 Quebec Parental Insurance Plan premiums are required in addition
to the Employment Insurance premiums
 Union Dues are not allowed as a reduction of gross taxable income
 Group medical insurance premiums paid by the employer are a
taxable benefit for Quebec pensionable and taxable income

6-5 The amount of taxable benefit that is attributed to the employee is used
to calculate pensionable and insurable income, but is neither paid to or
deducted from the employee’s pay. In addition, any allowed reductions
in taxable income that the employee is entitled to based on a written
authorization from the Canada Revenue Agency or Revenue Quebec is
only use for tax calculation purposes.

Suggested Exercises:
6-1 This is an excellent opportunity for class participation and in the
author’s experience provides an effective learning of the chapter and
course to date contents. This works effectively as a white board exercise
giving the students the opportunity to create and then solve the net pay
calculations for an employee.

Dryden 1e: Solutions Manual Chapter 6

©2016 McGraw-Hill Education. All Rights Reserved.
2
6-2 The results of this exercise will vary based on the province chosen by the
instructor and/or student. It can be used as an in-class or assigned
exercise.

6-3 Most students will assume that employers are always correct in net pay
calculations. Unfortunately, that is not a valid assumption. This exercise
which will vary by student can lead to some interesting class discussion
when the net pay appears to be incorrect. The instructor will need
patience in assisting students with understanding any apparent errors.

6-4 The amount of the garnishment should be calculated as: 20% of “net
pay” ($1,441.04-65.26-27.09-131.00-64.10) which equals $230.72.

Assessment Questions:
6-1 d) $1,682.31
6-2 c) $1,598.46
6-3 b) $16.15
6-4 a) $1,582.31
6-5 b) $72.46
6-6 d) $29.75
6-7 c) $1,598.46
6-8 a) $1,583.46
6-9 b) $144.85
6-10 c) $56.70
6-11 d) $347.99
6-12 a) $1,334.32

Dryden 1e: Solutions Manual Chapter 6

©2016 McGraw-Hill Education. All Rights Reserved.
3
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