Deck 14: Payroll Accounting: Employer Taxes and Records

Question 1

Which one of the following payroll taxes does not result in a payroll tax expense for the employer?

A) FICA tax
B) Federal income tax
C) Federal unemployment tax
D) State unemployment tax

Answer 1

B

Question 2

Form 941 is used to report FICA taxes and unemployment taxes.

Answer 2

False

Question 3

The employer's FICA contribution is 6.2% of the first $128,400 of earnings per employee, and 1.45% of each employee's earnings without limit.

Answer 3

True

Question 4

FICA taxes are levied on employees' earnings without limit.

Question 5

The following totals for the month of April were taken from the payroll register of Asplend Company. $$\begin{array}{ll}\text {Salaries and wages }&\text {\$72,000 }\\\text {FICA taxes withheld }&5,508\\\text {income taxes withheld}&15,000\\\text { medical insurance deductions}&2,700\\\text { federal unemployment taxes}&192\\\text {state unemployment taxes }&1,296\end{array}$$ The entry to record the Payroll Tax Expense would include a

A) credit to Salaries and Wages Payable.
B) credit to FICA Taxes Payable.
C) credit to Payroll Tax Expense.
D) debit to Federal Unemployment Taxes Payable.

Question 6

Total payroll tax expense is the total of the employer's FICA contribution plus federal unemployment tax.

Question 7

The following totals for the month of April were taken from the payroll register of Asplend Company. $$\begin{array}{ll}\text {Salaries and wages }&\text {\$72,000 }\\\text {FICA taxes withheld }&5,508\\\text {income taxes withheld}&15,000\\\text { medical insurance deductions}&2,700\\\text { federal unemployment taxes}&192\\\text {state unemployment taxes }&1,296\end{array}$$ The entry to record the accrual of federal unemployment taxes would include a

A) credit to Federal Unemployment Taxes Payable for $192.
B) debit to Federal Unemployment Taxes Expense for $192.
C) credit to Payroll Tax Expense for $192.
D) debit to Federal Unemployment Taxes Payable for $192

Question 8

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

Question 9

The taxable wage base for FUTA is the first $128,400 of wages paid to each employee.

Question 10

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

Question 11

The following totals for the month of April were taken from the payroll register of Asplend Company. $$\begin{array}{ll}\text {Salaries and wages }&\text {\$72,000 }\\\text {FICA taxes withheld }&5,508\\\text {income taxes withheld}&15,000\\\text { medical insurance deductions}&2,700\\\text { federal unemployment taxes}&192\\\text {state unemployment taxes }&1,296\end{array}$$ The entry to record accrual of Asplend Company's payroll taxes would include a

A) debit to Payroll Tax Expense for $1,488.
B) debit to Payroll Tax Expense for $6,996.
C) credit to FICA Taxes Payable for $11,016.
D) credit to Payroll Tax Expense for $1,488.

Question 12

Companies must report FICA taxes quarterly.

Question 13

The following totals for the month of April were taken from the payroll register of Asplend Company. $$\begin{array}{ll}\text {Salaries and wages }&\text {\$72,000 }\\\text {FICA taxes withheld }&5,508\\\text {income taxes withheld}&15,000\\\text { medical insurance deductions}&2,700\\\text { federal unemployment taxes}&192\\\text {state unemployment taxes }&1,296\end{array}$$ Asplend's total payroll tax expense for the period is

A) $1,488.
B) $6,996.
C) $20,508.
D) $21,996.

Question 14

Form W-3 summarizes the totals of each category on the W-2 forms.

Question 15

The company will use two different accounts to record the employee's and employer's FICA contributions.

Question 16

Companies must report and pay FICA taxes monthly.

Question 17

Total payroll tax expense is the total of the employee's and employer's FICA contributions plus federal unemployment tax.

Question 18

The state unemployment tax basic rate is usually 5.4%.

Question 19

Employee payroll deductions include each of the following except

A) federal unemployment taxes.
B) federal income taxes.
C) FICA taxes.
D) insurance, pension plans, and union dues.

Question 20

Form 940 is used to report federal unemployment taxes.

Question 21

Assume the following totals for Minihaha Tubing for the year ended December 31, 2022: $$\begin{array}{ll}\text {employee FICA tax }&\text {\$68,000 }\\\text { federal income tax }&181,000\\\text {state income taxes }&18,000\\\text { employer FICA tax}&68,000\\\text { federal unemployment tax}&1,000\\\text {state unemployment tax}&8,000\end{array}$$ The total tax reported on Form 940 is

A) $1,000
B) $9,000
C) $68,000
D) $137,000

Question 22

To report federal unemployment tax to the IRS, companies use

A) Form 940
B) Form 941
C) Form W-2
D) Form W-3

Question 23

Assume the following data for Jay's Cutlery for the quarter ended March 31, 2022: $$\begin{array}{ll}\text {employee FICA tax }&\text {\$16,000 }\\\text { federal income tax }&42,000\\\text {state income taxes }&4,200\\\text { employer FICA tax}&16,000\\\text { federal unemployment tax}&850\\\text {state unemployment tax}&7,650\end{array}$$ Appropriate monthly deposits of Taxes for first quarter 72,000
Form 941 for the first quarter would show

A) $2,000 balance due.
B) $2,000 overpaid.
C) $13,150 balance due.
D) $13,150 overpaid.

Question 24

FICA Taxes Payable was credited for $12,400 in Montreat Company's entry to record payroll. When Montreat Company records employer's payroll taxes, FICA Taxes Payable should be credited for

A) $0.
B) $12,400.
C) $24,800.
D) some other amount.

Question 25

The gross payroll total for all employees of Yanni's Gyros in January is $120,000. $100,000 of the employees' wages fall below the unemployment tax limit. The total unemployment tax is

A) $ 420.
B) $5,400.
C) $6,000.
D) $7,200.

Question 26

The gross payroll total for all employees of Yanni's Gyros this month is $120,000. $100,000 of the employees' wages fall below the Social Security limit. The total FICA taxes for both employees and employer is

A) $7,940.
B) $9,087.
C) $15,880.
D) $18,174.

Question 27

To report FICA taxes and federal income tax to the IRS, companies use

A) Form 940
B) Form 941
C) Form W-2
D) Form W-3

Question 28

The gross payroll total for all employees of Yanni's Gyros this month is $120,000. All employees' wages fall below the Social Security limit. The total FICA taxes for both employees and employer is

A) $9,087.
B) $9,180.
C) $18,174.
D) $18,360.

Question 29

Assume the following data for Jay's Cutlery for the quarter ended March 31, 2022: $$\begin{array}{ll}\text {employee FICA tax }&\text {\$16,000 }\\\text { federal income tax }&42,000\\\text {state income taxes }&4,200\\\text { employer FICA tax}&16,000\\\text { federal unemployment tax}&850\\\text {state unemployment tax}&7,650\end{array}$$ Appropriate monthly deposits of taxes for first quarter 76,000
Form 941 for the first quarter would show

A) $2,000 balance due.
B) $2,000 overpaid.
C) $17,150 balance due.
D) $17,150 overpaid.

Question 30

The following totals for the month of June were taken from the payroll register of Ford Company. $$\begin{array}{ll}\text {Salaries and wages }&\text {\$80,000 }\\\text {FICA taxes withheld }&6,132\\\text {income taxes withheld}&17,600\\\text { medical insurance deductions}&3,200\\\text { federal unemployment taxes}&640\\\text {state unemployment taxes }&4,000\end{array}$$ The entry to record the accrual of federal unemployment taxes would include a

A) credit to Federal Unemployment Taxes Payable for $640.
B) credit to Federal Unemployment Taxes Expense for $640.
C) credit to Payroll Tax Expense for $640.
D) debit to Federal Unemployment Taxes Payable for $640.

Question 31

Assume the following data for Jay's Cutlery for the quarter ended March 31, 2022: $$\begin{array}{ll}\text {employee FICA tax }&\text {\$16,000 }\\\text { federal income tax }&42,000\\\text {state income taxes }&4,200\\\text { employer FICA tax}&16,000\\\text { federal unemployment tax}&850\\\text {state unemployment tax}&7,650\end{array}$$ The total taxes reported on Form 941 and paid for the first quarter are

A) $16,000.
B) $58,000.
C) $58,850.
D) $74,000.

Question 32

The following totals for the month of June were taken from the payroll register of Parks Company. $$\begin{array}{ll}\text {salaries and wages }&\$80,000\\\text {FICA taxes withheld }&6,132\\\text {income taxes withheld }&17,600\\\text {medical insurance daductions }&3,200\\\text {federal unemployment taxes }&640\\\text {state unemployment taxes }&4,00\end{array}$$ The entry to record the payroll tax expense would include a

A) debit to Salaries and Wages Payable.
B) debit to Federal Unemployment Taxes Expense.
C) debit to Payroll Tax Expense.
D) credit to Payroll Tax Expense.

Question 33

FICA Taxes Payable was credited for $27,000 in the entry when Highlands Company recorded payroll. When Highlands Company records employer's payroll taxes, FICA Taxes Payable should be credited for:

A) $0.
B) $27,000.
C) $54,000.
D) some other amount.

Question 34

The following totals for the month of June were taken from the payroll register of Parks Company. $$\begin{array}{ll}\text {Salaries and wages }&\text {\$80,000 }\\\text {FICA taxes withheld }&6,132\\\text {income taxes withheld}&17,600\\\text { medical insurance deductions}&3,200\\\text { federal unemployment taxes}&640\\\text {state unemployment taxes }&4,000\end{array}$$ The entry to record accrual of Parks Company's payroll taxes would include a

A) debit to Payroll Tax Expense for $10,772
B) credit to Payroll Tax Expense for $10,772
C) credit to FICA Taxes Payable for $4,640.
D) credit to Payroll Tax Expense for $4,640.

Question 35

The following totals for the month of June were taken from the payroll register of Parks Company. $$\begin{array}{ll}\text {salaries and weges }&\$80,000\\\text {FICA taxes withheld }&6,132\\\text { income taxes withheld}&17,600\\\text {medical insurance deductions }&3,200\\\text { federal unemployment taxes}&640\\\text {state unemployment taxes }&4,000\end{array}$$ Parks' total payroll tax expense for the period is

A) $4,640.
B) $10,772.
C) $23,732.
D) $28,332.

Question 36

To summarize the totals of each category on the W-2 forms, companies use

A) Form 940
B) Form 941
C) Form W-2(S)
D) Form W-3

Question 37

The gross payroll total for all employees of Yanni's Gyros in January is $120,000. All employees' wages fall below the unemployment tax limit. The total unemployment tax is

A) $ 420.
B) $ 720.
C) $6,480.
D) $7,200.

Question 38

Payroll tax expense does not include:

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

Question 39

The following totals for the month of June were taken from the payroll register of Brettschneider Company. $$\begin{array}{ll}\text {Salaries and wages }&\text {\$22,000 }\\\text {FICA taxes withheld }&1,693\\\text {income taxes withheld}&5,000\\\text { medical insurance deductions}&900\\\text { federal unemployment taxes}&59\end{array}$$ The entry to record accrual of Brettschneider Company's payroll taxes would include a

A) debit to Payroll Tax Expense for $1,742.
B) debit to Payroll Tax Expense for $1,683.
C) credit to FICA Taxes Payable for $6,683.
D) credit to Payroll Tax Expense for $59.

Question 40

Which one of the following payroll taxes is not withheld from an employee's wages because it is not levied on the employee?

A) Federal income tax
B) Federal unemployment tax
C) State income tax
D) FICA tax

Question 41

When paying payroll taxes,

A) various expense accounts are debited.
B) cash is debited.
C) various liability accounts are debited.
D) various expense accounts are credited.

Question 42

In January, gross earnings for employees of Napoli Company totaled $20,000. All earnings are subject to 7.65% FICA taxes, 5.4% state unemployment taxes, and 0.6% federal unemployment taxes. Prepare the entry to record January payroll tax expense.

Question 43

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 44

Ada Marion earns a salary of $7,500 per month during the year. FICA taxes are 7.65% on the first $128,400 of gross earnings. Federal unemployment insurance taxes are 6% of the first $7,000; however, a credit is allowed equal to the state unemployment insurance taxes of 5.4% on the $7,000. During the year, $25,600 was withheld for federal income taxes and $5,700 was withheld for state income taxes.
Instructions
(a) Prepare a journal entry summarizing the payment of Ada's total salary during the year.
(b) Prepare a journal entry summarizing the employer payroll tax expense on Ada's salary for the year.
(c) Determine the cost of employing Ada for the year.

Question 45

Compute the FICA taxes for both employee and employer given the following independent scenarios for The Fish House:
1. The gross payroll total for all employees this month is $30,000. Assume that all employees' wages fall below the Social Security limit.
2. The gross payroll total for all employees this month is $30,000. The amount of employees' wages that fall below the Social Security limit is $25,000.

Question 46

Compute the total federal and state unemployment taxes given the following independent scenarios for SugarTime.
1. The gross payroll total for all employees this month is $10,000. Assume that all employees' wages fall below the $7,000 unemployment tax limit.
2. The gross payroll total for all employees this month is $10,000. The amount of employees' wages that fall below the $7,000 unemployment tax limit is $8,000.

Question 47

Assume that the payroll records of Klein Oil Company provided the following information for the weekly payroll ended November 30, 2022. $\begin{array}{lrrrrr}&&&&&\text { Year-to-Date }\\\text { Employee }&\text { Hours Worked }&\text { Hourly } & \text { Federal } &&\text { Earnings Through } \\&&\text { Pay Rate } & \text { Income Tax }&\text { Union Dues }&\text { Previous Week}\\\hline\text { T. King } & 44 & \$ 55 & \$ 442 & \$ 9 & \$ 129,400 \\\text { T. Binion } & 46 & 15 & 97 & 5 & 23,200 \\\text { N.Cole } & 40 & 25 & 148 & - & 5,700 \\\text { C. Hennesey } & 42 & 30 & 230 & 7 & 49,500\end{array}$ Additional information: All employees are paid overtime at time and a half for hours worked in excess of 40 per week. The FICA tax rate is 7.65% for the first $128,400 of each employee's annual earnings. The employer pays unemployment taxes of 6% (5.4% for state and .6% for federal) on the first $7,000 of each employee's annual earnings. Ignore Medicare taxes on earnings above $128,400.
Instructions
(a) For each employee and in total, compute the gross pay and net pay for the pay period.
(b) Prepare general journal entries to record the payroll and payroll taxes.

Question 48

Lily Hise had earned (accumulated) salary of $121,400 through November 30. Her December salary amounted to $9,800. Richard Shoenthaler began employment on December 1 and will Instructions
Record the payroll for the two employees at December 31 and record the employer's share of payroll tax expense for the December 31 payroll.

Question 49

Employee earnings records for Oz Company reveal the following gross earnings for four employees through the pay period of December 15. $$\begin{array}{ll}\text {T. Tucker }&\$95,500&\text { D. Pavia}&\$125.000\\\text {B. Bintey}&\$124,200&\text { N. Doane}&\$138,000\end{array}$$ 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 employer's

Question 50

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 51

The following payroll liability accounts are included in the ledger of Devito Company on January 1, 2022: $$\begin{array}{ll}\text {FICA taxes payable }&\$1,750\\\text {fedreral income taxes payable }&4,000\\\text {state income taxes payable }&665\\\text { federal unemployment taxes payable}&175\\\text {state unemployment taxes payable }&1,190\\\end{array}$$ In January, the following transactions occurred:
Jan. 11 Deposited a check for $5,750 in Federal Reserve Bank for FICA taxes and federal income taxes withheld.
18 Paid state income taxes withheld from employees.
21 Paid state and federal unemployment taxes.
Instructions
Journalize the January transactions

Question 52

Employer payroll taxes include all of the following except

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

Question 53

Instructions
Compute Massimini's payroll tax expense for the year. Make a summary journal entry to record the payroll tax expense.

Question 54

Assume the following data for Sports Guys for the quarter ended March 31, 2022: $$\begin{array}{ll}\text {number of empolyees for first quarter: }&10\\\text {gross earning}&\$100,000\\\text {employee FICA tax}&\$7,650\\\text { federal income tax}&\$20,000\\\text { state income tax}&\$2,000\\\text {employer FICA tax}&\$7,650\\\text { federal unemployment taxes}&\$450\\\text {state unemployment taxes }&\$4,000\end{array}$$
total monthly deposits related to form 941 for first qurter: $\quad$ $36,000 Compute the amounts that would appear on Form 941 for
a) Line 12: Balance due
b) Line 13: Overpayment

Question 55

Which of the following payroll taxes are usually filed and remitted annually?

A) Federal unemployment taxes
B) FICA taxes
C) State unemployment taxes
D) Federal and state unemployment taxes

Question 56

The effective federal unemployment tax rate is usually

A) 6.0%.
B) 0.6%.
C) 5.4%.
D) 8.0%.

Question 57

In March, gross earnings of Perlman Company totaled $250,000. All earnings are subject to 7.65% FICA taxes, 5.4% state unemployment taxes, and 0.6% federal unemployment taxes.
Instructions
(a) Compute the employer's payroll tax expense.
(b) Prepare the entry to record payroll taxes.

Question 58

Assume the following totals for The Disc Golf Palace for the year ended December 31, 2022: $\begin{array}{ll}\text { Gross earnings } & \$ 100,000 \\\text { Employee FICA tax } & \$ 7,650 \\\text { Federal Income tax } & \$ 20,000 \\\text { State Income tax } & \$ 2,000 \\\text { Employer FICA tax } & \$ 7,650 \\\text { Federal unemployment tax } & \$ 102 \\\text { State unemployment tax } & \$ 900 \\\text { Wages subject to FUTA tax. } & \$ 17,000\\\\\text { Total 2022 subject related to Form 940: } & \$ 90\end{array}$ Compute the amounts that would appear on Form 940 for
a) Line 14: Balance due
b) Line 15: Overpayment

Question 59

Takei Company's payroll for the week ending January 15 amounted to $367,000 for salaries and wages. None of the employees has reached the earnings limits specified for federal or state employer payroll taxes. The following deductions were withheld from employees' salaries and wages: $\begin{array}{lr}\text { Federal Income Tax } & \$ 75,000 \\\text { State Income Tax } & 13,500 \\\text { FICA Taxes } & 28,075 \\\text { Union Dues } & 4,100 \\\text { United Fund Contributions } & 2,700\end{array}$ Federal unemployment tax (FUTA) rate is 6% less a credit equal to the rate paid for state unemployment taxes. The state unemployment tax (SUTA) rate is 5.4%.
Instructions
Prepare the journal entry to record the weekly payroll ending January 15 and also the employer's payroll tax expense on the payroll.

Question 60

In February, gross earnings for employees of Napoli Company totaled $75,000. All earnings are subject to 7.65% FICA taxes, 5.4% state unemployment taxes, and 0.6% federal unemployment taxes. Prepare the entry to record February payroll tax expense.

Question 61

The total amount payable by the company for the Social Security portion of FICA is __________%, and the total amount payable by the company for the Medicare portion of FICA is __________%.

Question 62

The total of the employer's share of FICA, federal unemployment tax, and state unemployment tax is debited to ___________________________.

Question 63

Forms 940-V and 941-V are used for _______________ of taxes.

Question 64

FICA taxes consist of both _______________________________ and ________________________.

Question 65

The employer incurs a payroll tax expense equal to the amount contributed by each employee for ______________ taxes.

Question 66

The employer must make a total of six copies of each employee's ________________________________________.

Question 67

Mi Ranchito had the following amounts for a recent pay period: $\begin{array}{lr}\text { Gross payroll total } & \$ 40,000 \\\text { Amount of employee wages that fall below the Social Security limit } & 39,000 \\\text { Amount of employee wages that fall below the unemployment tax limit } & 10,000\end{array}$ Prepare the entry to record payroll taxes.

Question 68

An employee's net pay consists of gross pay less mandatory and voluntary payroll deductions. Identify the mandatory payroll deductions. Are these deductions recognized as payroll tax expenses by the employer? What type of payroll tax expenses does the employer incur related to having a payroll?

Question 69

A payroll tax expense which is borne entirely by the employer is the federal _______________ tax.

Question 70

Form 941 is used to report _______________________ and ______________________.

Question 71

Steve Holden, controller for Glenda Company, was approached by Helena Glenda, the CEO. Helena asked that Steve do something to increase net income from $94,000 to slightly over $100,000 to meet the requirements of a bank loan. Steve replaced a $9,000 debit to Payroll Tax Expense when recording the employer payroll taxes with a debit to Land, since the large balance in that account would not Required:
Was Helena's request, or Steve's action, ethical? Explain.

Question 72

Identify the three types of employer payroll taxes.
(b) How are tax liability accounts and payroll tax expense accounts classified in the financial statements?

Question 73

A. Which of the following would appear on payroll tax Form 941 ?

Gross earnings
Employee FICA tax
Federal Income tax
State Income tax
Employer FICA tax
Federal unemployment tax
State unemployment tax

B. How frequently are these forms filed?
Form W-2
Form W-3
Form 940
Form 941

Question 74

Mi Ranchito had the following amounts for a recent pay period: $$\begin{array}{ll}\text {Gross payroll total }&\$40,000\\\text {amount of employee wages that fall below the social security limit }&39,000\\\text { amount of employee wages that fall below the unemployment tax limit}&10,000\\\end{array}$$ a) Compute the total payroll tax expense for the pay period.
b) Compute the increase in FICA Taxes Payable as a result of this pay period.

Question 75

Payroll tax expense results from FICA tax, _____________________________, and _____________________.

Question 76

Assume the following totals for Roadkill Restaurant for the payroll quarter ended March 31, 2022: $\begin{array}{ll}\text { Gross earnings } & \$ 70,000 \\\text { Employee FICA tax } & \$ 5,355 \\\text { Federal income tax } & \$ 13,000 \\\text { State income tax } & \$ 1,350\end{array}$ $\begin{array}{ll}\text { Employer FICA tax } & \$ 5,355 \\\text { Federal unemployment tax } & \$ 300 \\\text { State unemployment tax } & \$ 2,700\end{array}$

Payroll Accounting
:
FOR INSTRUCTOR USE ONLY
FOR INSTRUCTOR USE ONLY
If all taxes were paid on April 15, what entry does Roadkill make?

Question 77

Assume the following data for RacquetSports! for the quarter ended June 30, 2022: $\begin{array}{lr}\text { Number of employees for the quarter: } 10\\\text { Gross earnings } & \$ 50,000 \\\text { Employee FICA tax } & \$ 3,825 \\\text { Federal Income tax } & \$ 10,500 \\\text { State Income tax } & \$ 1,000 \\\text { Employer FICA tax } & \$ 3,825 \\\text { Federal unemployment tax } & \$ 300 \\\text { State unemployment tax } & \$ 1,800\end{array}$ Monthly Federal Income Tax and FICA tax liability: January $4,500, February $6,500,
March $7,150
Federal Income Tax and FICA tax total monthly deposits for first quarter: $18,000
Instructions: What numbers would be input on Form 941 for the following line items: Line 3: Federal income tax withheld
Line 5a: Taxable social security wages
Line 5c: Taxable Medicare wages and tips
Line 6: Total taxes before adjustments
Line 11: Total deposits for this quarter
Line 12. Balance due
Line 13 : Overpayment

Question 78

Kellog Industries is a manufacturing company that makes various industrial components out of aluminum. Kellog is located in a large city in the northeastern United States. Various labor disputes have occurred in the city, some with acrimonious public debate concerning the honesty of management. During one of Kellog's routine employee meetings, Colin Ross, a production worker, brought up the issue of the cost of a worker as reported in the company's annual report.
The cost was given as $32,000 per year. Colin points out that the average wage rate of $12 per hour is at most around $25,000 in gross wages. He asks whether the company is adding in overtime, because if so, the figures are misleading because the employees are not allowed to work overtime.
Required:
Prepare a note explaining to Mr. Ross how Kellog might calculate a cost per employee that is greater than gross wages. Explain in general terms only. Do not use any calculations.

Question 79

There is no ____________________from employees' salaries for State Unemployment Tax.