Chapter 8 Accounting

What is the taxable earnings ceiling for Social Security?

$106,800

"If the accumulated tax liability of the Federal Unemployment tax is greater than _____, the tax is deposited electronically."

$500

What is the maximum liability that can be taxed on for unemployment? (What dollar amount)

$7,000

What is the tax percentage charged on the employer for FUTA? (Federal unemployment tax)

(0.6%) 0.006

"EFTPS tax deposits must be processed __ calendar day(s) in advance of the tax liability due date to be considered on time and to avoid penalties."

1 calender day.

What are the four steps to record the journal entry for payroll?

1. Record the payroll for the present period in the payroll register. 2. Based on the payroll register, record the payroll entry in the journal. 3. Based on the Taxable Earnings columns of the payroll register, record Payroll Tax Expense in the journal. 4. Record a journal entry to pay the employees.

What is the percentage imposed on employees and employers for Medicare taxation?

1.45% (0.0145)

In the book, what is the percent for Social Security imposed on employees for taxable earnings?

4.2% (0.042)

What is the tax percentage charged on the employer for SUTA? (State unemployment tax)

5.4% (0.054)

What is the employer's percent imposed for Social Security?

6.2% (0.062)

"For any balance due on the 941 report, a _______ form accompanies the report and payment."

941-V

"For any balance due on the 941 form, a ___ form accompanies the report and payment."

941-V form

Generally, what is the time schedule for payment of workers' compensation?

Annually, on January 10th. (The date varies among states.)

How often is Form 940 prepared?

Annually.

What are the due dates for Form 941?

April 30, July 31, October 31, and January 31.

How many copies are made of a Form W-2?

At least four.

Why is the FICA Taxes Payable account used for both the tax liability of the employer and the amount withheld from the employee for the FICA tax?

Because both the employee and employer's FICA tax are going to the same place at the same time anyway.

Explain how payroll fraud can be prevented.

By establishing and following internal controls put in place to prevent and detect payroll fraud.

What does the Payroll Tax Expense account do?

Debits the account for the company's portion of FICA taxes and for state and federal unemployment taxes.

"The IRS now requires all companies to make tax deposits electronically, using the ______."

Electronic Federal Tax Payment System

What does EFTPS stand for?

Electronic Federal Tax Payment System

Who gets taxed for Medicare?

Employee and Employer

"When recording the journal entry for payroll, _____ must be deducted from the salary expense and the resulting amount is put into the Wages Payable account at the end of the entry."

Employees' Federal Income Tax Payable FICA Taxes Payable Employees' State Income Tax Payable And any charity donation or repaid loans.

What does the journal entry look like to record the deposit of Federal Income taxes?

Employees' Federal Income Tax Payable FICA Taxes Payable Cash

Describe the journal entry to pay the FICA and Federal Income Tax withholding.

Employees' Federal Income Tax payable, FICA Taxes Payable(dr), Cash (cr).

What does the journal entry for Employee's State Income tax withholding deposit look like?

Employees' State Income Tax Payable (dr) Cash (cr)

Describe the journal entry to pay the state income tax withholding.

Employees' State Income Tax Payable is debited, Cash is credited.

The federal tax deposit includes the combined total of what three items?

Employees' federal income taxes withheld Employees' FICA taxes withheld Employer's share of FICA taxes

"Employers' reports submitted to the Internal Revenue Service all must contain the ______."

Employer Identification Number.

What does EIN stand for?

Employer Identification Number.

How often is Form 941 prepared and submitted?

Every three months (quarterly).

"The _____ account is often used for both the tax liability of the employer and the amounts withheld from the employees."

FICA Taxes Payable

What taxes are included under the Payroll Tax Expense entry in the journal?

FICA taxes, State unemployment tax, Federal unemployment tax.

What taxes are employers accounting for that increase the debit to Payroll Tax Expense?

FICA, State Unemployment tax, Federal Unemployment tax

What does the journal entry for depositing the Federal Unemployment tax look like?

Federal Unemployment Tax Payable Cash

"-------- is the Employer's Quarterly Federal Tax Return."

Form 941

"_______ provides an employee with his 0r her total earnings and tax deductions for the year."

Form W-2.

Explain the advantage of establishing a tax calendar.

It can help keep up with the task of paying and reporting the various taxes. Missing a tax deposit or filing due date can result in penalties.

Explain the deposit requirement for the federal unemployment tax.

It must be deposited on the last day of the month following the end of the quarter.

What two taxes make up the FICA tax?

Medicare and Social Security.

What is the due date for Form 940?

No later than January 31st. The deadline may be extended until February 10 if the employer has made deposits paying the FUTA tax liability in full.

"After _____, the employer must make payments in the form of federal tax deposits."

Paying the employees.

What should the Payroll Taxes entry look like in the journal?

Payroll Tax Expense FICA Taxes Payable State Unemployment Tax Payable Federal Unemployment Tax Payable

What does the employer's payroll taxes journal entry look like?

Payroll Tax Expense (dr) FICA Taxes Payable (cr) State Unemployment Tax Payable (cr) Federal Unemployment Tax Payable (cr)

Describe the journal entry to record the employer's payroll tax contribution.

Payroll Tax Expense is debited. FICA Taxes Payable, SUTA Payable, and FUTA Payable are all credited.

"The _______ account is used to record the employees and employers matching portion of FICA taxes, the federal unemployment tax, and the state unemployment tax."

Payroll Tax Expense.

"The accountant obtains the Social Security and Medicare taxable earnings amounts from the _______."

Payroll register.

"The second ______ of the year consists of the months of April, May, and June."

Quarter.

What is the purpose of Form 940?

Shows total wages paid to employees, total wages subject to federal unemployment tax, and other information. This form shows the government how much they should be taxed for the FUTA tax.

"____ employers will credit cash directly instead of Wages Payable."

Small.

What does the journal entry look like to deposit the State Unemployment tax?

State Unemployment Tax Payable Cash

Describe the journal entry to pay the state and federal unemployment taxes.

State/Federal Unemployment Tax Payable is debited, Cash is credited.

"An employer's counterpart to the Social Security Number."

The Employer Identification Number.

Who assigns employer identification numbers?

The Internal Revenue Service.

What is the taxable earnings ceiling for Medicare?

The Medicare tax does not have a taxable earnings ceiling.

"In most states, the unemployment taxes are levied on ____ only."

The employer.

Who uses the copies of the W-2 form?

The employer.

When must federal tax deposits be made?

The timing depends on the amount of payroll.

What is the purpose of Form 941?

To report the tax liability for withholdings of employees' federal income tax and the employee and employer's share of FICA taxes.

"Form _____ is submitted to the Social Security Administration accompanied by copies of W-2 forms."

W-3

What does the adjusting entry for accrued salaries and wages look like?

Wages Expense (dr) Wages Payable (cr)

What does the journal entry to pay the employees look like?

Wages Payable Cash-Payroll Bank Account

Describe the journal entry to pay the payroll.

Wages Payable is debited, Cash is credited.

Describe the journal entry to record payroll.

Wages expense is debited. Employees' Federal Income Tax payable, FICA taxes payable, Employees' State Income tax payable, Charity Payable, Accounts Receivable, and Wages payable can be/are credited. (Charity Payable and Accounts Receivable may or may not be credited.)

What is the journal entry for recording payroll?

Wages/Salary Expense Employees' Federal Income Tax Payable FICA Taxes Payable Employees' State Income Tax Payable (Employees' United Way Payable) (Accounts Receivable) Wages Payable

"________________ is used to provide benefits for employees injured on the job."

Workers compensation insurance