Question 1

Compensation expressed in terms of hours, weeks, or units produced for skilled or unskilled labor is usually referred to as salary.

Accepted Answer

Compensation expressed in terms of hours, weeks, or units produced for skilled or unskilled labor is usually referred to as wages. Salary is typically a fixed amount of pay given to an employee on an annual basis, and is not dependent on the number of hours worked or units produced.

Question 2

Every individual who performs services for a business is considered to be an employee.

Accepted Answer

This statement is false. There are several types of individuals who may perform services for a business, including independent contractors, interns, and volunteers, who are not considered employees. It is important for businesses to properly classify their workers to ensure compliance with labor laws and tax regulations.

Question 3

The Medicare tax rate is subject to a maximum amount.

Accepted Answer

The Medicare tax does not have a maximum taxable earnings limit; it applies to all wages and self-employment income without cap, unlike Social Security tax which does have a maximum taxable amount.

Question 4

The earnings base, against which the FICA tax is applied, and the tax rate have been changed several times since the law was first enacted and can be changed by Congress at any time in the future.

Accepted Answer

The earnings base and tax rate for FICA can be changed by Congress at any time in the future.

Question 5

The difference between an independent contractor and an employee is an important legal distinction.

Accepted Answer

This is true because independent contractors and employees have different legal rights and obligations, including tax obligations, workers' compensation, and benefits. It is important to correctly classify workers as independent contractors or employees to avoid legal issues and potential penalties.

Question 6

The payroll register replaces the general journal in most businesses.

Accepted Answer

The payroll register does not replace the general journal; it is a specialized record for tracking payroll details, while the general journal is used for recording a wide range of financial transactions in a business.

Question 7

Companies must accumulate payroll data both for the business as a whole and for each employee.

Accepted Answer

Companies need to keep track of payroll data for both the entire business and each individual employee in order to accurately calculate wages, deductions, taxes, and other payroll-related expenses. This information is important for budgeting, financial analysis, and compliance with labor laws and regulations.

Question 8

Compensation for managerial or administrative services usually is expressed in biweekly, monthly, or annual terms and is called wages.

Accepted Answer

Compensation for managerial or administrative services is usually expressed in terms of salary, not wages. Wages typically refer to compensation for hourly or piecework labor.

Question 9

The payroll register is a summary of the annual earnings of each employee.

Accepted Answer

The payroll register is a record of all payments made to employees during a specific pay period, including gross pay, deductions, and net pay. It is not a summary of annual earnings.

Question 10

The Fair Labor Standards Act provides that all employees covered by the act must be paid one and one-half times the regular rate for all hours worked over 40 per week.

Accepted Answer

This statement is true according to the Fair Labor Standards Act.

Question 11

Employers primarily use the wage-bracket method to determine the amount of tax to be withheld from an employee's pay.

Accepted Answer

The wage-bracket method is one of the most common methods used by employers to calculate how much tax to withhold from an employee's paycheck. It involves using a table provided by the IRS that shows the appropriate amount of withholding based on the employee's income and withholding status. Other methods include the percentage method and the annualized income method.

Question 12

An independent contractor performs a service for a fee and works under the control and direction of the company paying for the service.

Accepted Answer

An independent contractor performs services for a fee but operates under their own control and direction, not under the direct control of the company paying for the service.

Question 13

The Fair Labor Standards Act requires employees to pay double the regular hourly rate for the time worked on Saturday.

Accepted Answer

The Fair Labor Standards Act does not require employers to pay double the regular hourly rate for time worked on Saturdays. It does require employers to pay overtime (time and a half) for any hours worked over 40 in a workweek.

Question 14

The various government laws and regulations regarding employee deductions, employer payroll taxes, payroll records, and payroll reports apply only to employees and not to independent contractors.

Accepted Answer

The laws and regulations regarding employee deductions, employer payroll taxes, payroll records, and payroll reports do not apply to independent contractors as they are not considered employees.

Question 15

Plastic cards or badges encoded with basic employee data are now being used in computer-based time keeping systems.

Accepted Answer

Plastic cards or badges encoded with basic employee data are commonly used in computer-based time keeping systems.

Question 16

Government laws and regulations regarding payroll are much more complex for employees than for independent contractors.

Accepted Answer

This is because employers have more legal obligations when it comes to paying their employees, such as withholding taxes, paying Social Security and Medicare contributions, providing benefits, and complying with labor laws. Independent contractors have more autonomy over their work and how they are compensated, and are not subject to the same legal requirements as employees.

Question 17

FICA taxes include amounts for both Social Security but not Medicare programs.

Accepted Answer

FICA taxes include amounts for both Social Security and Medicare programs.

Question 18

Payroll expenditures represent a relatively small part of the total expenditures of most companies.

Accepted Answer

Payroll expenditures can often make up a significant portion of a company's total expenditures, especially in industries that rely heavily on labor such as manufacturing, healthcare, and retail.

Question 19

Separate accounts are kept for each type of earnings deduction.

Accepted Answer

Separate accounts are kept for each type of earnings deduction to ensure accurate record-keeping and to make it easier to track how much is being deducted for each type of earning. This helps both the employer and the employee to have a better understanding of their finances.

Question 20

Under federal law, employers are required to withhold a percentage of the employees' wages for pensions.

Accepted Answer

While employers are required to withhold a percentage of employees' wages for taxes and Social Security, there is no federal law mandating employers to provide pension plans or withhold wages for pensions.

Quiz 8: Payroll Accounting: Employee Earnings and Deductions