Question 1

Marla Smith, an employee of Clown College, earned $113,000 prior to December. Smith's salary for December is $11,000. For what amount will Smith's December salary be subject to OASDI tax and HI tax, respectively.

Accepted Answer

The OASDI tax applies only up to the wage base limit, which is $128,400 for 2023. Since Smith has already earned $113,000, only $15,400 more can be taxed for OASDI. Therefore, the full $11,000 December salary is subject to OASDI. HI tax has no wage base limit, so the entire $11,000 is subject to HI tax.

Question 2

Withheld payroll deductions become:

Accepted Answer

Withheld payroll deductions, such as taxes or benefits, are funds that the employer has collected from employees but has not yet remitted to the appropriate parties. Therefore, they are considered a liability of the employer until they are paid out.

Question 3

The tax rate on the HI (Medicare)portion of FICA is:

Accepted Answer

The tax rate on the HI (Medicare) portion of FICA is 1.45%. The remaining 6.20% is the tax rate on the OASDI (Social Security) portion of FICA. Therefore, the correct answer is B.

Question 4

The maximum tax credit an employer can get for FUTA if they pay unemployment taxes to a state is:

Accepted Answer

The maximum tax credit an employer can receive for FUTA (Federal Unemployment Tax Act) when they pay state unemployment taxes is 5.4%. This credit is designed to encourage employers to pay into their state's unemployment fund.

Question 5

FUTA is paid by the employer on:

Accepted Answer

FUTA (Federal Unemployment Tax Act) is a tax paid by the employer to provide unemployment benefits to employees who lose their jobs. The tax is calculated on the first $7,000 of an employee's earnings, and the current tax rate is 6%. Therefore, the employer pays FUTA on the first $7,000 of each employee's earnings, and not on any amount above that.

Question 6

The journal entry to record the employer's portion of FICA tax includes a:

Accepted Answer

The employer's portion of FICA tax is recorded as a payroll tax expense, so the journal entry includes a debit to payroll tax expense.

Question 7

Richard is paid a salary of $6,000. At the end of November, his cumulative gross earnings were $97,000. How much will his employer take out for the OASDI portion of social security for December? (Round your final answer to the nearest cent.)

Accepted Answer

The OASDI portion of social security is 6.2%, so Richard's employer will take out $6,000 x 0.062 = $372.00 for December.

Question 8

Richard is paid a salary of $9,000. At the end of November, his cumulative gross earnings were $95,000. How much will his employer take out for the HI portion of social security for December? (Round your final answer to the nearest cent.)

Accepted Answer

The HI portion of social security is 1.45% of gross earnings. To find out how much will be taken out in December, we need to subtract Richard's cumulative gross earnings in November from his cumulative gross earnings in December and then multiply that amount by 1.45%.

Cumulative gross earnings in December = $95,000 + $9,000 = $104,000
Amount earned in December = $104,000 - $95,000 = $9,000
HI portion of social security for December = $9,000 x 0.0145 = $130.50

Therefore, the answer is C.

Question 9

Kat's wages for December are $8,500. At the end of November, her cumulative gross earnings were $112,000. How much will her employer take out for the OASDI portion of social security for December? (Round your final answer to the nearest dollar.)

Accepted Answer

The OASDI (Old-Age, Survivors, and Disability Insurance) portion of Social Security tax is 6.2% on earnings up to the taxable maximum, which is $147,000 for the year in question. Kat's cumulative earnings before December were $112,000, and with her December wages of $8,500, her total earnings for the year would be $120,500, which is below the $147,000 cap. Therefore, her December wages are fully subject to the 6.2% OASDI tax. The calculation is $8,500 * 0.062 = $527. However, the correct answer is rounded to the nearest dollar, which should be $527, indicating a mistake in the selection process. The correct calculation leads to $527, but based on the provided options and instructions, the intended answer seems to be misaligned with the calculation.

Question 10

The combined FICA rate for employees is:

Accepted Answer

The combined FICA rate for employees is 7.65%, which includes the Social Security tax rate of 6.20% and the Medicare tax rate of 1.45%.

Question 11

The tax rate on the OASDI portion of FICA is:

Accepted Answer

The tax rate on the OASDI (Social Security) portion of FICA is 6.20%. The Medicare portion of FICA is taxed at a rate of 1.45%, which brings the total FICA tax rate to 7.65%. Therefore, option C is the correct choice.

Quiz 9: Current Liabilities and Long-Term Debt