Deck 13: Payroll Accounting: Employee Taxes and Records

Question 1

The employer incurs a payroll tax expense equal to the amount withheld from the employees' wages for federal income taxes.

Answer 1

False

Question 2

Salaries and Wages Expense is debited for the net pay of the company's employees.

Answer 2

False

Question 3

An employee earnings record is a cumulative record of each employee's gross earnings, deductions, and net pay.

Answer 3

True

Question 4

Internal control over payroll is not necessary because employees will complain if they do not receive the correct amount on their payroll checks.

Question 5

The human resources department documents and authorizes employment of new employees.

Question 6

The objectives of internal accounting control for payrolls are (a) to safeguard company assets from unauthorized payments of payrolls and (b) to assure accuracy and reliability of the accounting records pertaining to payroll.

Question 7

Maintaining payroll department records is not part of recording the payroll.

Question 8

Payroll activities involve three functions: hiring employees, preparing the payroll, and paying the payroll.

Question 9

The total compensation earned by an employee is called

A) take-home pay.
B) net pay.
C) net earnings.
D) gross earnings.

Question 10

FICA taxes and federal income taxes are mandatory payroll deductions.

Question 11

The timekeeping function includes supervisors monitoring hours worked through time cards and time reports.

Question 12

Sarah Jones's regular rate of pay is $30 per hour with one and one-half times her regular rate for any hours which exceed 40 hours per week. She worked 48 hours last week. Therefore, her gross wages were

A) $1,440.
B) $1,200.
C) $1,560.
D) $2,160.

Question 13

When a company gives employees rights to receive compensation for absences and the payment for such absences is probable and the amount can be reasonably estimated, the company should accrue a liability.

Question 14

FICA taxes are a voluntary deduction from employee earnings.

Question 15

The Wage and Tax Statement is also called the Form W-2.

Question 16

A liability account is credited for each mandatory and voluntary deduction.

Question 17

Salaries and Wages Payable is credited for the gross earnings of the company's employees.

Question 18

FICA taxes and federal income taxes are levied on employees' earnings without limit.

Question 19

Which of the following employees would likely receive a salary instead of wages?

A) Store clerk
B) Factory employee
C) Sales manager
D) Manual laborer

Question 20

FICA taxes are a deduction from employee earnings and are also imposed upon employers as an expense.

Question 21

The record that provides a cumulative summary of each employee's gross earnings, payroll deductions, and net pay during the year and is required to be maintained to comply with state and local federal law is the

A) register.
B) employee earnings record.
C) statement of earnings.
D) wage and tax statement.

Question 22

The paid absence that is most commonly accrued is

A) voting leave.
B) vacation time.
C) maternity leave.
D) disability leave.

Question 23

The amount of income taxes withheld from employees is dependent on each of the following except the

A) employee's gross earnings.
B) employee's net pay.
C) length of the pay period.
D) number of allowances claimed by the employee.

Question 24

For Dear Orleans Restaurant, the gross earnings of its employees total $14,000 and deductions total $4,000. $14,000 should be

A) debited to Salaries and Wage Expense.
B) credited to Salaries and Wage Expense.
C) debited to Salaries and Wage Payable.
D) credited to Salaries and Wage Payable.

Question 25

The journal entry to record the payroll for Fox-Gardiner Company for the week ending January 8, would probably include a

A) credit to Salaries Expense.
B) credit to Wages Expense.
C) debit to Federal Income Taxes Payable.
D) credit to FICA Taxes Payable.

Question 26

A payroll record that accumulates the gross earnings, deductions, and net pay by employee for each pay period is the

A) withholding tax table.
B) employee earnings record.
C) payroll register.
D) Wage and Tax Statement.

Question 27

Lake Norman Company has twenty employees who each earn $120 per day. If they accumulate vacation time at the rate of 1.5 vacation days for each month worked, the amount of vacation benefits that should be accrued at the end of the month is

A) $240.
B) $2,400.
C) $3,600.
D) $360.

Question 28

Most companies are required to compute overtime at

A) the worker's regular hourly wage.
B) 1.25 times the worker's regular hourly wage.
C) 1.5 times the worker's regular hourly wage.
D) 2.5 times the worker's regular hourly wage.

Question 29

Which is not accumulated for each employee in the payroll register?

A) number of allowances
B) gross earnings
C) deductions
D) net pay

Question 30

Jason Gomi has worked 44 hours this week. He worked in excess of 8 hours each day. His regular hourly wage is $9 per hour. What are Jason's gross wages for the week? (Overtime paid at time-and-half.)

A) $396
B) $414
C) $594
D) $432

Question 31

Recording the payroll does not involve:

A) internal control for payroll.
B) maintaining payroll department records.
C) recognizing payroll expenses and liabilities.
D) recording payment of the payroll.

Question 32

Assuming a FICA tax rate of 7.65% on the first $128,400 in wages, 1.45% on amounts in excess of $128,400, and a federal income tax rate of 20% on all wages, what would be an employee's net pay for the year if he earned $180,000 for the year?

A) $134,867
B) $127,620
C) $144,000
D) $133,429

Question 33

The tax that is paid equally by the employer and employee is the

A) federal income tax.
B) federal unemployment tax.
C) state unemployment tax.
D) FICA tax.

Question 34

For Dear Orleans Restaurant, the gross earnings of its employees total $14,000 and deductions total $4,000. $10,000 should be

A) debited to Salaries and Wage Expense.
B) credited to Salaries and Wage Expense.
C) debited to Salaries and Wage Payable.
D) credited to Salaries and Wage Payable.

Question 35

Kenny Corsig, an employee of Fenwick Company, has gross earnings for the month of October of $3,000. FICA taxes are 7.65% of gross earnings, federal income taxes amount to $476 for the month, state income taxes are 2% of gross earnings, and voluntary deductions are $8 per month to the United Way. What is the net pay for Kenny?

A) $2,295
B) $2,227
C) $2,235
D) $2,287

Question 36

Mary Ehrat, an employee of Eddington Company, has gross earnings for the month of October of $8,000. FICA taxes are 7.65% of gross earnings, federal income taxes amount to $1,270 for the month, state income taxes are 2% of gross earnings, and Mary authorizes voluntary deductions of $20 per month to the United Fund. What is the net pay for Mary Ehrat?

A) $6,118
B) $5,938
C) $5,958
D) $6,098

Question 37

The uses of the employee earnings record do not include

A) determining when an employee has hit the FICA maximum.
B) helping when filing state and federal payroll tax returns.
C) providing each employee with a Form W-2.
D) determining the number of allowances claimed by an employee.

Question 38

Smita Quinn, earns $30 per hour for a 40 hour work week and $45 per hour for overtime work. If Smita works 44 hours, her gross earnings are:

A) $1,320.
B) $1,380.
C) $1,568.
D) $1,980.

Question 39

FICA taxes do not provide workers with

A) life insurance.
B) supplemental retirement.
C) employment disability.
D) medical benefits.

Question 40

For Dear Orleans Restaurant, the gross earnings of its employees total $14,000 and deductions total $4,000. $4,000 should be

A) debited to various expense accounts.
B) credited to various expense accounts.
C) debited to various liability accounts.
D) credited to various liability accounts.

Question 41

Who should authorize employment?

A) Human Resources Department.
B) Supervisors.
C) Treasurer.
D) the prospective employee.

Question 42

For Tower Junction Restaurant, the total net pay of its employees is $14,000 and deductions total $4,000. $14,000 should be

A) debited to Salaries and Wage Expense.
B) credited to Salaries and Wage Expense.
C) debited to Salaries and Wage Payable.
D) credited to Salaries and Wage Payable.

Question 43

The following totals for the month of April were taken from the payroll register of Asplend Company. $$\begin{array}{ll}\text {salaries and wages }&\$72,000\\\text { FICA taxes withheld}&5,508\\\text { income taxes withheld}&15,000\\\text {medical insurance deductions }&2,700\end{array}$$
The journal entry to record the monthly payroll on April 30 would include a

A) debit to Salaries and Wages Expense for $72,000.
B) credit to Salaries and Wages Payable for $72,000.
C) debit to Salaries and Wages Payable for $72,000.
D) debit to Salaries and Wages Expense for $51,000.

Question 44

The following totals for the month of June were taken from the payroll register of Parks Company. $$\begin{array}{ll}\text {salaries and wages }&\$80,000\\\text { FICA taxes withheld}&6,132\\\text { income taxes withheld}&17,600\\\text {medical insurance deductions }&3,200\end{array}$$
The entry to record the payment of net payroll would include a

A) debit to Salaries and Wages Payable for $48,428.
B) debit to Salaries and Wages Payable for $53,068.
C) debit to Salaries and Wages Payable for $49,068.
D) credit to Cash for $49,068.

Question 45

For Tower Junction Restaurant, the total net pay of its employees is $14,000 and deductions total $4,000. $18,000 should be

A) be debited to Salaries and Wage Expense.
B) be credited to Salaries and Wage Expense.
C) be credited to Salaries and Wage Payable.
D) not be included in the payroll journal entry.

Question 46

Which fraud is usually prevented when the Human Resource Department documents and authorizes employment?

A) Fictitious employees added to the payroll.
B) Employee paid for hours not worked.
C) Payroll calculations are inaccurate.
D) Checks are misappropriated.

Question 47

Which is not a fraud associated with payroll?

A) Issuance of W-2 Forms.
B) Use of unauthorized pay rates.
C) Terminated employees continuing to be on the payroll.
D) Distribution of duplicate payroll checks.

Question 48

The treasurer's department is responsible for

A) approving the payroll.
B) maintaining payroll records.
C) preparing payroll tax returns.
D) signing payroll checks.

Question 49

Which fraud is usually prevented when the treasurer signs and distributes prenumbered checks?

A) Fictitious employees added to the payroll.
B) Employee paid for hours not worked.
C) Payroll calculations are inaccurate.
D) Checks are misappropriated.

Question 50

Who should approve the payroll amount?

A) Human Resources Department.
B) Supervisors.
C) Treasurer.
D) the employee.

Question 51

For Tower Junction Restaurant, the total net pay of its employees is $14,000 and deductions total $4,000. $10,000 should

A) be debited to Salaries and Wage Expense.
B) be credited to Salaries and Wage Expense.
C) be credited to Salaries and Wage Payable.
D) not be included in the payroll journal entry.

Question 52

Who should monitor hours worked?

A) Human Resources Department.
B) Supervisors.
C) Treasurer.
D) the employee.

Question 53

The payment of the payroll should include a

A) debit to Salaries and Wage Expense.
B) credit to Salaries and Wage Expense.
C) debit to Salaries and Wage Payable.
D) debit to Cash.

Question 54

By January 31 following the end of a calendar year, an employer is required to provide each employee with a(n)

A) state unemployment tax form.
B) federal unemployment tax form 940.
C) wage and tax statement form W-2.
D) employee's withholding allowance certificate form W-4.

Question 55

The following totals for the month of April were taken from the payroll register of Asplend Company. $$\begin{array}{ll}\text {salaries and wages }&\$72,000\\\text { FICA taxes withheld}&5,508\\\text { income taxes withheld}&15,000\\\text {medical insurance deductions }&2,700\end{array}$$
The entry to record the payment of net payroll would include a

A) debit to Salaries and Wages Payable for $47,304.
B) debit to Salaries and Wages Payable for $48,792.
C) debit to Salaries and Wages Payable for $43,284.
D) credit to Cash for $54,300.

Question 56

The following totals for the month of June were taken from the payroll register of Parks Company. $$\begin{array}{ll}\text {salaries and wages }&\$80,000\\\text { FICA taxes withheld}&6,132\\\text { income taxes withheld}&17,600\\\text {medical insurance deductions }&3,200\end{array}$$ The journal entry to record the monthly payroll on June 30 would include a

A) debit to Salaries and Wages Expense for $80,000.
B) credit to Salaries and Wages Payable for $80,000.
C) debit to Salaries and Wages Payable for $80,000.
D) debit to Salaries and Wages Expense for $53,068.

Question 57

The payroll is paid by the

A) personnel department.
B) payroll department.
C) cashier.
D) treasurer's department.

Question 58

Which fraud is usually prevented when supervisors monitor hours worked?

A) Fictitious employees added to the payroll.
B) Employee paid for hours not worked.
C) Payroll calculations are inaccurate.
D) Checks are misappropriated.

Question 59

Which fraud is usually prevented when two employees verify payroll amounts?

A) Fictitious employees added to the payroll.
B) Employee paid for hours not worked.
C) Payroll calculations are inaccurate.
D) Checks are misappropriated.

Question 60

The journal entry to record the payroll for a period will include a credit to Salaries and Wages Payable for the gross

A) pay less all payroll deductions.
B) pay
C) pay less taxes payable.
D) pay less voluntary deductions.

Question 61

Indicate if the following practices reflect strong or weak internal controls, and why.
1. Hugo Friedkin works in the sales department where a new employee, Lydia Spring, has been hired. The HR Department adds Lydia to payroll.
2. Payroll amounts are verified by two HR employees, and the supervisor approves the amounts.
3. The supervisor of the Sales Department signs and distributes prenumbered paychecks to the sales employees.

Question 62

Bart Curlish earns a salary of $500/week. This week, he also earned commissions of $600 and a bonus of $50. Bart's federal income tax withholding is $150, and he has a voluntary deduction of $40 for health insurance. Record the payroll for Bart's pay.

Question 63

Who should sign and distribute payroll checks?

A) Human Resources Department.
B) Supervisors.
C) Treasurer.
D) the employee.

Question 64

Dirk Gently's regular hourly wage rate is $16, and he receives an hourly rate of $24 for work in excess of 40 hours. During a recent pay period, Dirk works 46 hours. Dirk's federal income tax withholding is $100, and he has no voluntary deductions. Compute Dirk Gently's gross earnings for the pay period.

Question 65

Todd Brotzman, an employee of Holistic Health, has a regular hourly wage rate of $16, and he receives an hourly rate of $24 for work in excess of 40 hours. During the week ended January 15, Todd works 44 hours. Todd's federal income tax withholding is $90, and he has a voluntary deduction of $40 for health insurance. Holistic Health is preparing an Employee Earnings record for the week ending January 15. Prior to the current week, Todd's total gross earnings for the current year were $760. Compute the following amounts to a) Gross Earnings - Regular
b) Gross Earnings - Overtime
c) Gross Earnings - Total
d) Gross Earnings - Cumulative

Question 66

Dirk Gently's regular hourly wage rate is $16, and he receives an hourly rate of $24 for work in excess of 40 hours. During a recent pay period, Dirk works 46 hours. Dirk's federal income tax withholding is $100, and he has no voluntary deductions. Record the payroll for Dirk Gently's wages.

Question 67

Farah Black has total wages of $130,000 for the year. Assume the Social Security limit is $128,400. Compute Farah's total FICA taxes.

Question 68

Maddy Peters's regular hourly wage rate is $14, and she receives an hourly rate of $21 for work in excess of 40 hours. During a March pay period, Maddy works 47 hours. Maddy's federal income tax withholding is $80, and she has no voluntary deductions. Prepare the journal entry to record Maddy's pay for the period. Use March 15 for the end of the pay period.

Question 69

Based on the Payroll Register, prepare the journal entry to record the payroll.

Question 70

Santi Santiga's regular hourly wage rate is $18, and she receives an hourly rate of $27 for work in excess of 40 hours. During a recent pay period, Santi works 48 hours. Santi's federal income tax withholding is $140, and she has voluntary deductions of $25 for United Fund, $10 for union dues, and $50 for health insurance. Compute Santi's gross earnings and net pay for the pay period.

Question 71

Bart Curlish earns a salary of $500/week. This week, he also earned commissions of $600 and a bonus of $50. Bart's federal income tax withholding is $150, and he has a voluntary deduction of $40 for health insurance. Compute Bart's gross earnings and net pay for the pay period.

Question 72

Amanda Brotzman's regular hourly wage rate is $18, and she receives an hourly rate of $27 for work in excess of 40 hours. During a recent pay period, Amanda works 48 hours. Amanda's federal income tax withholding is $140, and she has a voluntary deduction of $50 for health insurance. Compute Amanda Brotzman's gross earnings for the pay period.

Question 73

Employee earnings records for Oz Company reveal the following gross earnings for four employees through the pay period of December 15. $\begin{array}{llll}\text { T. Tucker } & \$ 95,500 & \text { D. Paiva } & \$ 125,500 \\\text { B. Bitney } & \$ 124,200 & \text { N. Doane } & \$ 138,000\end{array}$ For the pay period ending December 31, each employee's gross earnings is $4,800. The FICA tax rate is 7.65% on gross earnings of $128,400.
Instructions
Compute the FICA withholdings that should be made for each employee for the December 31 pay period. (Show computations.)

Question 74

Welly Company employees are entitled to one day's vacation for each month worked. In February, 60 employees worked the full month. Record the vacation pay liability for February assuming the average daily pay for each employee is $90.

Question 75

Mike Dooley's regular hourly wage is $16 an hour. He receives overtime pay at the rate of time and a half. The FICA tax rate is 7.65%. Mike is paid every two weeks. For the first pay period in January, Mike worked 86 hours of which 6 were overtime hours. Mike's federal income tax withholding is $350 and his state income tax withholding is $110. Mike has authorized that $50 Instructions
Compute Mike Dooley's gross earnings and net pay for the pay period showing each payroll deduction in arriving at net pay.

Question 76

Indicate if the following practices reflect strong or weak internal controls, and why.
1. Hugo Friedkin works in the sales department where a new employee, Lydia Spring, has been hired. Hugo adds Lydia to payroll.
2. Payroll amounts are computed by an HR employee and the supervisor approves the amounts.
3. Estevez, the treasurer, signs and distributes prenumbered paychecks to the employees.

Question 77

Amanda Brotzman's regular hourly wage rate is $18, and she receives an hourly rate of $27 for work in excess of 40 hours. During a recent pay period, Amanda works 48 hours. Amanda's federal income tax withholding is $140, and she has a voluntary deduction of $50 for health insurance. Compute Amanda Brotzman's gross earnings and net pay for the pay period.

Question 78

Marilou Wheeler's regular hourly wage rate is $14, and she receives a wage of 1 1/2 times her regular rate for work in excess of 40 hours. During a June pay period, Marilou worked 46 hours. Marilou's federal income tax withholding is $68, and her only voluntary deduction is $25 for group hospitalization insurance. The FICA tax rate is 7.65%.
Instructions
Compute Marilou's (a) gross earnings and (b) net pay for the pay period.

Question 79

Maddy Peters' regular hourly wage rate is $14, and she receives an hourly rate of $21 for work in excess of 40 hours. During a March pay period, Peters works 47 hours. Her federal income tax withholding is $80, and she has no voluntary deductions. Compute Peters' gross earnings and net pay for the pay period.

Question 80

Dirk Gently's regular hourly wage rate is $16, and he receives an hourly rate of $24 for work in excess of 40 hours. During a recent pay period, Dirk works 46 hours. Dirk's federal income tax withholding is $100, and he has no voluntary deductions. Compute Dirk Gently's gross earnings and net pay for the pay period.