Question 1

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

Accepted Answer

The employer incurs a payroll tax expense for their portion of Social Security and Medicare taxes, and possibly state unemployment taxes, but not for the federal income taxes withheld from employees' wages. The federal income tax withheld is a liability to the government, not an expense for the employer.

Question 2

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

Accepted Answer

Salaries and Wages Expense is debited for the gross pay, not the net pay, of the company's employees. Net pay is the amount after deductions, which is credited to Cash or Salaries Payable.

Question 3

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

Accepted Answer

An employee earnings record is a document that contains detailed information on the wages earned by an employee. It includes the employee's gross pay, deductions, and net pay. This record is used to calculate tax withholdings, monitor overtime, track vacation and sick time, and determine eligibility for benefits.

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.

Accepted Answer

Internal control over payroll is necessary to prevent errors or fraud, even if employees may complain if they notice a mistake. Internal control measures can help ensure that payroll is calculated accurately and that only authorized employees are able to make changes to payroll records.

Question 5

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

Accepted Answer

The human resources department is responsible for documenting and authorizing the 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.

Accepted Answer

The objectives of internal accounting control for payrolls are indeed to safeguard company assets from unauthorized payments of payrolls and 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.

Accepted Answer

Maintaining payroll department records is an important part of recording the payroll to ensure accuracy, compliance with regulations, and proper documentation for future reference.

Question 8

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

Accepted Answer

Payroll activities primarily involve preparing the payroll, distributing the payroll, and reporting taxes; hiring employees is generally considered a separate function related to human resources.

Question 9

The total compensation earned by an employee is called

Accepted Answer

Gross earnings refer to the total amount of compensation earned by an employee before any deductions are made, such as taxes or benefits. Take-home pay or net pay refers to the amount of money an employee actually receives after these deductions are made. Net earnings and gross earnings are not synonymous, as net earnings refer to the amount of money an individual earns after deducting all expenses from their gross income.

Question 10

FICA taxes and federal income taxes are mandatory payroll deductions.

Accepted Answer

FICA taxes (Social Security and Medicare) and federal income taxes are both mandatory payroll deductions.

Question 11

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

Accepted Answer

The statement is true. The timekeeping function involves supervisors monitoring hours worked through the use of 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

Accepted Answer

For the first 40 hours, Sarah earns $30 per hour, so she earns 40 x 30 = $1200. 
For the additional 8 hours, she earns one and a half times her regular rate, which is 1.5 x 30 = $45 per hour. 
So she earns 8 x 45 = $360. 
Therefore, her gross wages are $1200 + $360 = $1560. 
Therefore, the answer is C, $1,560.

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.

Accepted Answer

If 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. This is in accordance with generally accepted accounting principles (GAAP). Accruing this liability ensures that the company's financial statements reflect the true and fair value of the company's obligations to its employees.

Question 14

FICA taxes are a voluntary deduction from employee earnings.

Accepted Answer

FICA taxes are not voluntary deductions, they are mandatory deductions from employee earnings that fund Social Security and Medicare programs.

Question 15

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

Accepted Answer

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

Question 16

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

Accepted Answer

This is true. Liability accounts are credited for each mandatory and voluntary deduction because these deductions are amounts that are owed by the employer to a third party (such as taxes or insurance premiums). The credit to the liability account represents the increase in the employer's obligation to pay these amounts on behalf of the employee.

Question 17

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

Accepted Answer

Salaries and Wages Payable is credited for the net amount owed to employees after deductions, not the gross earnings. Gross earnings are initially recorded as an expense.

Question 18

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

Accepted Answer

FICA taxes, which fund Social Security and Medicare, have a wage base limit for Social Security taxes, but Medicare taxes do not have a limit. Federal income taxes are levied without a wage limit but at progressive rates.

Question 19

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

Accepted Answer

A sales manager is typically a salaried employee, meaning they receive a fixed amount of pay each year regardless of the number of hours worked. Store clerks, factory employees, and manual laborers are typically paid hourly wages.

Question 20

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

Accepted Answer

FICA (Federal Insurance Contributions Act) taxes, which fund Social Security and Medicare, are split between employers and employees. Employers are responsible for deducting the employee's portion from earnings and also paying an equal amount as an expense.

Quiz 13: Payroll Accounting: Employee Taxes and Records