Question 1

Tom's gross pay for the month is $2,400. Tom's deduction for federal income tax is based on a rate of 20%. Tom has no voluntary deductions. Tom's yearly pay is under the limit for OASDI. What is the amount of FICA withheld from Tom's pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

Accepted Answer

First, Tom's federal income tax deduction is 20% of his gross pay, which is 0.20 x $2,400 = $480. This leaves Tom with a net pay of $2,400 - $480 = $1,920.

Next, we need to calculate Tom's FICA withholdings. His FICA-OASDI Tax is 4.2% of his gross pay, which is 0.042 x $2,400 = $100.80. His FICA-Medicare Tax is 1.45% of his gross pay, which is 0.0145 x $2,400 = $34.80.

Therefore, the total FICA withheld from Tom's pay is $100.80 + $34.80 = $135.60. Choice B is the correct answer.

Question 2

Which of the following are required to be deducted from employees' paychecks?

Accepted Answer

Federal income tax is required to be deducted from employees' paychecks according to federal law. SUTA (State Unemployment Tax Act) and FUTA (Federal Unemployment Tax Act) are employer-paid payroll taxes, not deductions from employee paychecks. Charitable contributions may be deducted voluntarily by employees, but are not required to be deducted by the employer.

Question 3

It is mandatory for both the employer and employee to pay:

Accepted Answer

FICA (Federal Insurance Contributions Act) taxes are mandatory contributions from both the employer and employee to fund Social Security and Medicare.

Question 4

Which of the following is paid by the employer only?

Accepted Answer

The Federal Unemployment Tax is paid entirely by the employer, while OASDI tax and Medicare tax are split between the employer and employee, and employee income tax is solely the responsibility of the employee.

Question 5

Isabelle's gross pay for the week is $850. Her deduction for federal income tax is based on a rate of 19%. She has voluntary deductions of $135. Her yearly pay is under the limit for OASDI. What is the amount of her net pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

Accepted Answer

The answer of Isabelle's gross pay for the week is...

Question 6

________ is a pay amount stated at an hourly rate.

Accepted Answer

Wages are paid at an hourly rate for the hours worked. Salaries are typically paid on a regular basis and are not based on the number of hours worked. Commission is a percentage of sales, and bonuses are additional payments given as incentives or rewards for specific achievements.

Question 7

The journal entry in the payroll cycle to record employer's payroll tax expense will include a debit to Employee Income Taxes Payable.

Accepted Answer

The journal entry to record employer's payroll tax expense will typically include a debit to Payroll Tax Expense and a credit to various tax liability accounts such as FICA taxes payable, Medicare taxes payable, and Federal Unemployment Tax (FUTA) payable. There is no debit to Employee Income Taxes Payable as this account represents the amount of federal and state income taxes withheld from employees' paychecks and is not affected by the employer's payroll tax expense.

Question 8

Berkley's gross pay for the month is $5,400. His deduction for federal income tax is based on a rate of 18%. He has no voluntary deductions. His yearly pay is under the limit for OASDI. What is the amount of Berkley's net pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

Accepted Answer

The answer of Berkley's gross pay for the month is...

Question 9

Rocco worked 43 hours at his job during the first week of March, 2015. He is paid $14.5 per hour and receives overtime at the rate of time-and-one-half for hours worked over forty. What is Rocco's gross pay for the week?

Accepted Answer

Rocco's regular pay for 40 hours is $14.5 x 40 = $580.

For the remaining 3 hours, he gets overtime pay at the rate of 1.5 times his regular pay, which is $14.5 x 1.5 = $21.75 per hour.

So his overtime pay is $21.75 x 3 = $65.25.

Therefore, Rocco's gross pay for the week is $580 + $65.25 = $645.25.

Question 10

Which of the following deductions is paid by both the employer and employee?

Accepted Answer

FICA taxes include Social Security taxes and Medicare taxes, which are deducted from the employee's paycheck and matched by the employer. Therefore, both the employer and employee contribute towards FICA taxes. Federal income taxes, Federal unemployment taxes, and SUTA taxes are typically only paid by the employer.

Question 11

Parrish Sales withholds $720 from Art Parrish's paycheck for federal income tax. This amount is part of the company's payroll tax expense.

Accepted Answer

The $720 withheld from Art Parrish's paycheck for federal income tax is not part of the company's payroll tax expense; it is a liability that the company must remit to the government on behalf of the employee. Payroll tax expense refers to the employer's own tax obligations, such as Social Security and Medicare taxes.

Question 12

Which of the following taxes has a ceiling on the amount of annual earnings subject to tax?

Accepted Answer

FICA-OASDI taxes (also known as Social Security taxes) have a ceiling on the amount of annual earnings subject to tax. In 2021, the ceiling is $142,800. Any earnings above that amount are not subject to the FICA-OASDI tax. The other options listed do not have a ceiling on the amount of earnings subject to tax.

Question 13

Federal income taxes are:

Accepted Answer

Federal income taxes are deducted from an employee's gross pay in order to arrive at their net pay, which is the amount they actually receive after taxes.

Question 14

Rocco worked 43 hours at his job during the first week of March, 2015. He is paid $14.5 per hour and receives overtime at the rate of time-and-one-half for hours worked over 40. Rocco pays income taxes at 15% and 5.65% for OASDI and Medicare. All of his income is taxable for FICA. What is Rocco's net pay?

Accepted Answer

The answer of Rocco worked 43 hours at his job...

Question 15

Which of the following are extra compensation items that are not paid directly to an employee?

Accepted Answer

Benefits are extra compensation items that are not paid directly to an employee. Bonuses, wages, and commissions are all forms of direct compensation.

Question 16

Isabelle's gross pay for the week is $850. Her deduction for federal income tax is based on a rate of 19%. She has voluntary deductions of $135. Her yearly pay is under the limit for OASDI. What is the amount of FICA-Medicare Tax deducted from her pay? (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

Accepted Answer

The FICA-Medicare Tax is calculated as 1.45% of the gross pay. Therefore, 1.45% of $850 is $12.33.

Question 17

Which of the following is pay over and above base salary, usually paid for exceptional performance?

Accepted Answer

Bonuses are pay over and above base salary and are usually paid for exceptional performance. FICA is a mandatory payroll tax, benefits include non-wage compensation such as health insurance, and wages refer to hourly or annual pay for work performed.

Question 18

Art Panache, the sole employee of Panache Sales, has gross salary for March of $5,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. He is also subject to federal income tax at a rate of 20%. His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. The journal entry in the payroll cycle to record employer's payroll tax expense includes a credit to FICA-Medicare Taxes Payable for $145. (Assume a FICA-OASDI Tax of 6.2% and FICA-Medicare Tax of 1.45%.)

Accepted Answer

The answer of Art Panache, the sole employee of Panache...

Question 19

Art Panache, the sole employee of Panache Sales, has gross salary for March of $5,000. The entire amount is under the OASDI limit of $110,100, and thus subject to FICA. The total amount of employee FICA tax is $565. (Assume a FICA-OASDI Tax of 4.2% and FICA-Medicare Tax of 1.45%.)

Accepted Answer

The FICA-OASDI tax is 4.2% of $5,000, which is $210, and the FICA-Medicare tax is 1.45% of $5,000, which is $72.50. The total FICA tax is $282.50, not $565.

Question 20

________ is pay stated as a percentage of a sale amount.

Accepted Answer

Commission is pay stated as a percentage of a sale amount. Salary is a fixed amount of pay per year or month. Wage is typically a fixed hourly rate of pay. Bonus is additional pay given as a reward for good performance or achieving specific goals, and is not necessarily stated as a percentage of a sale amount.

Quiz 11: Current Liabilities and Payroll