Chapter 12

Does the employer or employee pay social security tax and Medicare tax?

Both the employee and the employer pay.

How is net pay calculated?

By subtracting total deductions from total earnings.

The money paid for employee services

Salary

What does the payroll register summarize?

The payroll register summarizes the payroll for one pay period and shows total earnings, payroll withholding's, and net pay of all employees.

What is the source of the information that is recorded on each employee's payroll check stub?

The payroll register.

What is a payroll?

The total amount earned by all employees for a pay period.

How does Hobby Shack calculate overtime earnings?

They use the same procedure as they do for regular hours.

A deduction from total earnings for each person legally supported by a taxpayer, including the employee.

Withholding Allowance

Where does an employer get the information used to determine the amount of federal income tax to withhold from employees' wages?

Withholding tables prepared by Internal Revenue Service.

How many hours were worked by a Hobby Shack employee who arrived at 8:29 and departed at 12:02?

3:30

How many hours were worked by an employee who arrived at 8:10 am and departed at 12:10 pm?

4 hours

What are the total earnings of a Hobby Shack employee who worked 44 hours in a week and earns $11.00 per hour?

$484

How many hours were worked by an employee who arrived at 7:05 am and departed at 6:05 pm with one hour off for lunch?

10 hours

Why do companies complete employee earnings records?

Because a business must send a quarterly report to federal and state governments showing employee taxable earnings and taxes withheld from employee earnings.

A business form used to record details affecting payments made to an employee.

Employee Earning record

Social security tax is calculated on

Employee earnings up to a maximum paid in a calendar year

Employee federal income tax withholdings are based on what two factors?

Employee marital status and number of withholding allowances.

A new earnings record is prepared for each employee each year

False

A single person will have less income tax withheld than a married employee.

False

Federal law requires that each employer have on file a properly completed W-2, Employee's Withholding Allowance Certificate, for each employee.

False

Social security tax is paid by the employer only.

False

The first task in preparing a payroll is to determine the number of days worked by each employee.

False

Total earnings are sometimes referred to as net pay or net earnings.

False

How do payroll procedures differ from employees who request that their pay be deposited through electronic funds transfer?

Individual checks are not written and do not have to be distributed.

The period covered by a salary payment

Pay period

The total amount earned by all employees for a pay period

Payroll

Taxes based on the payroll of a business

Payroll Taxes

Why does Hobby Shack have a separate checking account for payroll checks?

To help protect and control payroll payments.

The total pay due for a pay period before deductions.

Total Earnings

A business is required by law to withhold certain payroll taxes from the employee salaries.

True

A check for the total net pay is written and deposited in the payroll checking account

True

All deductions from employee wages are recorded in a payroll register.

True

Employee total earnings are calculated as regular hours X regular rate, plus overtime hours X overtime rate.

True

Employers in many states are required to withhold state, city, or county income tax from employee earnings.

True

Payroll taxes withheld represent a liability for an employer until payment is made.

True

Payroll time cards can be used as the basic source of information to prepare a payroll.

True

The amount of income tax withheld from each employee's total earnings is determined from the number of withholding allowances and by the employee's marital status.

True

The columns of the employee earnings record consist of the amount columns in a payroll register and an accumulated earnings column.

True

The information used to prepare payroll checks is taken from a payroll register.

True

When EFT is used, the employee does not receive an individual check

True

When an employee's earnings exceed the tax base, no more social security tax is deducted.

True

The total earnings paid to an employee after payroll taxes and other deductions.

net pay

A business form used to record payroll information.

payroll register

Employee regular earnings are calculated as

regular hours worked times regular rate

A federal tax paid for old-age, survivors, and disability insurance.

social security tax

The maximum amount of earnings on which a tax is calculated

tax base

What is a separate payroll checking account primarily used for?

to provide additional protection and control of individual payroll checks

A business may decide to pay employee salaries every week, every two weeks, twice a month, or once a month.

true

An act of Congress can change the social security tax base and the tax rate at any time.

true

An employee can be exempt from having federal income tax withhold under certain conditions.

true

Businesses use payroll records to inform employees of their annual earnings and to prepare payroll reports for the government.

true