Principles of Accounting I/Payroll & Payroll Taxes/Final Exam/Study-Guide

What does FICA stand for?

Federal Insurance Contribution Act (It was established in 1935 & went into effect in 1937)

What taxes are paid by the employee?

SIT (State Income Tax) FIT (Federal Income Tax) State Union Dues Federal Union Dues

What taxes are paid by the employer?

SUTA (State Unemployment Tax) FUTA (Federal Unemployment Tax) Workers Compensation

The payroll tax expense is recorded at the same time the payroll is recorded?

True

Ocean's Auction House's payroll for April includes the following data: Gross earnings $3,000 Salaries subject to FICA: 6.2% OASDI 2,550 1.45% Medicare 3,000 Salaries subject to unemployment: 0.8% FUTA 2,000 2.0% SUTA 2,000 Other deductions include: Federal income tax 500 State income tax 300 What is the employee's portion of the tax?

a. $1,057.60 b. $800 c. $257.60 d. $1,001.60 ANSWER: d

Sue's Jewelry Shoppe's July payroll includes the following data: Gross Salaries $12,000 Salaries subject to FICA: 6.2% Social Security 12,000 1.45% Medicare 12,000 Salaries subject to: FUTA 0.8% 6,000 SUTA 2.7% 6,000 The employer's payroll tax for the period would be:

a. $210 b. $1,000 c. $1,128 d. $918 ANSWER: c

What taxes are paid by the employer & employee?

FICA-O (Social Security) OASDI-old age survivor & disability insurance FICA-H (Medicare)

FICA taxes are levied only on employees.

False (FICA tax is both an employer and employee contribution.)

Both employer and employee contribute to FICA-OASDI and SUTA tax.

False (FICA-OASDI tax is both an employer and employee contribution. SUTA tax is an employer only contribution.)

Gross pay is equal to take-home pay.

False (Net Pay is equal to take-home pay.)

Companies can choose different pay periods for hourly workers verses salary workers.

True

TRUE/FALSE: Anything that says "prepaid" is an asset.

True

Tracey Thrasher earned $800 for the week. If her cumulative earnings are $30,000 prior to this pay period, how much FICA-OASDI must her employer withhold from her earnings? FICA tax rates are OASDI 6.2% on a limit of $106,800.

a. $49.60 b. $0 c. $496.00 d. None of the above are correct ANSWER: a

Blue's Tax Service has two types of employees, management and clerical support.The company estimates that it will pay the clerical support $300,000 next year and the managers $255,000. For every $100, the company pays $0.14 into the workers' compensation insurance. Calculate the amount of workers compensation insurance.

a. $777 b. $441 c. $336 d. None of the above are correct ANSWER: a

Derek works 43 hours at a rate of $15 per hour. He receives double pay over 40 hours. What is his gross pay?

a. $780 b. $690 c. $800 d. $720 ANSWER: b

A calendar quarter consists of:

a. 14 weeks b. 4 months c. 13 weeks d. 12 weeks ANSWER: c

If Shelia worked 38 hours, how many hours of overtime will Shelia earn?

a. 5 b. 0 c. 1 d. 9 ANSWER: b

Prepaid worker's compensation insurance is what type of account?

a. Expense b. Revenue c. Asset d. Liability ANSWER: c (Anything that says "Prepaid" is an asset.)

For which of the following taxes is there a ceiling on the amount of employee annual earnings?

a. FICA-OASDI b. State employment tax c. Federal unemployment tax d. All of these answers are correct ANSWER: a

The law that governs overtime earnings is called:

a. Federal Insurance Contribution Act b. Federal Wage and Hour Law c. Fair Labor Standards Act d. Both b and c are correct ANSWER: d

What is debited if State Unemployment Tax is credited?

a. Payroll tax expense b. Salaries expense c. Salaries Payable d. Cash ANSWER: a (Because SUTA is a tax, it must be a payroll tax expense.)

Which of the following would typically not be an employee payroll withholding?

a. Social Security b. Medical Insurance c. State income tax d. Unemployment taxes ANSWER: d

To examine in detail the weekly payroll of all employees, one would look at the :

a. W-4 b. employee earnings record c. W-2 d. payroll register ANSWER: d

The amount of income tax withheld from an employee during the year is determined by:

a. W-4 form b. 1040 form c. W-2 form d. None of these answers are correct ANSWER: a

Net pay is the same as:

a. before taxes pay b. gross pay c. pay before deductions d. take-home pay ANSWER: d

Wages and salaries expense is:

a. equal to gross pay b. equal to the employer's taxes c. equal to net pay d. None of the above are correct ANSWER: a

Payroll taxes include all of the following except:

a. federal income tax b. FICA-OASDI c. state income tax d. All of the above are payroll tax ANSWER: d

FICA (OASDI and Medicare) and unemployment taxes are similar in that they:

a. have the same maximum taxable wage base b. are payroll tax expenses of the employer c. are a specific percent of federal income tax withholding d. are paid by the employee ANSWER: b

Insurance paid in advance by employers to protect their employees against loss due to injury or death incurred during employment is:

a. health insurance b. life insurance c. liability insurance d. worker's compensation insurance ANSWER: d

A pay period is defined as:

a. monthly b. weekly c. bi-weekly d. All of the above are correct ANSWER: d

The Federal Insurance Contributions Act is better known as:

a. overtime laws b. FUTA c. FICA d. FIT ANSWER: c

Gross Earnings are the same as:

a. regular earnings only b. net earnings c. regular earnings + overtime earnings d. net earnings + overtime earnings ANSWER: c

The amount of FICA-OASDI and FICA-Medicare withheld from the employee's check is determined by the employee's:

a. take-home pay b. earnings for the period and cumulative earnings c. net-pay d. W-4 ANSWER: b