Deck 28: Payroll Accounting

Question 1

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

Answer 1

False

Question 2

Internal control over payroll is not necessary because employees will complain if they do not receive the correct amount on their payroll checks.

Answer 2

False

Question 3

The state unemployment tax rate is usually 5.4% on the first $7,000 of wages paid to an employee during the year.

Answer 3

True

Question 4

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

Question 5

Which one of the following payroll taxes is not withheld from the employee's wages because it is not levied on the employee?

A) Federal income tax
B) Federal unemployment tax
C) State income tax
D) FICA tax

Question 6

A Wage and Tax Statement shows gross earnings, FICA taxes withheld, and income taxes withheld for the year.

Question 7

The form showing gross earnings, FICA taxes withheld, and income taxes withheld for the year is

A) Form W-4.
B) Form W-2.
C) Form 1040.
D) Schedule A.

Question 8

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

Question 9

The journal entry to record the payroll for a period will include a credit to Salaries and Wages Payable for the gross

A) amount less all payroll deductions.
B) amount of all paychecks issued.
C) pay less taxes payable.
D) pay less voluntary deductions.

Question 10

By January 31 following the end of a calendar year, an employer is required to provide each employee with a(n)

A) state unemployment tax form.
B) federal unemployment tax form 940.
C) wage and tax statement form W-2.
D) employee's withholding allowance certificate form W-4.

Question 11

Jerri Rice has worked 44 hours this week. She worked at least 8 hours each day. Her regular hourly wage is $12 per hour with one and one-half times her regular rate for any hours which exceed 40 hours per week. What are Jerri's gross wages for the week?

A) $528
B) $552
C) $792
D) $576

Question 12

FICA taxes do not provide workers with

A) life insurance.
B) supplemental retirement.
C) employment disability.
D) medical benefits.

Question 13

Assuming a FICA tax rate of 7.65% on the first $117,000 in wages and 1.45% in excess of $117,000 and a federal income tax rate of 20% on all wages, what would be an employee's net pay for the year if he earned $180,000? Round all calculations to the nearest dollar.

A) $134,867
B) $133,953
C) $144,000
D) $134,136

Question 14

A good internal control feature is to have several employees choose one person to punch all of their time cards.

Question 15

A good internal control feature is to have a written hiring authorization form completed before a new employee is added to the payroll.

Question 16

Lucie Ball's regular rate of pay is $15 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

A) $720.
B) $600.
C) $780.
D) $1,080.

Question 17

FICA taxes withheld and federal income taxes withheld are mandatory payroll deductions.

Question 18

Most companies are required to compute overtime at

A) the worker's regular hourly wage.
B) 1.25 times the worker's regular hourly wage.
C) 1.5 times the worker's regular hourly wage.
D) 2.5 times the worker's regular hourly wage.

Question 19

Which one of the following payroll taxes does not result in a payroll tax expense for the employer?

A) FICA tax
B) Federal income tax
C) Federal unemployment tax
D) State unemployment tax

Question 20

An employee's time card is used to record the number of exemptions claimed by the employee for income tax withholding purposes.

Question 21

The effective federal unemployment tax rate is usually

A) 6.2%.
B) 0.8%.
C) 5.4%.
D) 8.0%.

Question 22

Control over timekeeping does not include

A) having one employee punch the time cards for several employees in the same work area.
B) time clock procedure monitoring by a supervisor.
C) pay period time reports kept by a supervisor for salaried personnel.
D) overtime approval by a supervisor.

Question 23

The tax that is paid equally by the employer and employee is the

A) federal income tax.
B) federal unemployment tax.
C) state unemployment tax.
D) FICA tax.

Question 24

Which of the following is not performed by the payroll department?

A) Preparation of payroll checks
B) Maintaining payroll records
C) Signing of payroll checks
D) Preparation of payroll tax returns

Question 25

Match the codes assigned to the following payroll functions to the procedures listed below:
H = Hiring Employees PRE = Preparing the Payroll
T = Timekeeping PAY = Paying the Payroll
1. ____ Distribution of checks by the treasurer.
2. ____ Supervisor approves hours worked.
3. ____ Posting job openings.
4. ____ Maintenance of payroll records.
5. ____ Verification of payroll calculations.
6. ____ Screening and interviewing of job applicants.
7. ____ Employment authorization.
8. ____ Signing prenumbered payroll checks.
9. ____ Use of a timeclock.
10. ____ Payroll tax return preparation.
11. ____ Employee signs receipt acknowledging cash received.
12. ____ Documentation of employee hiring.

Question 26

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

A) Store clerk
B) Factory employee
C) Sales manager
D) Manual laborer

Question 27

Assume that the payroll records of Erroll Oil Company provided the following information for the weekly payroll ended November 30, 2018.
Additional information: All employees are paid overtime at time and a half for hours worked in excess of 40 per week. The FICA tax rate is 7.65% for the first $117,000 of each employee's annual earnings and 1.45% in excess of $117,000. The employer pays unemployment taxes of 6.2% (5.4% for state and .8% for federal) on the first $7,000 of each employee's annual earnings.
Instructions
(a) Prepare the payroll register for the pay period.
(b) Prepare general journal entries to record the payroll and payroll taxes.

Question 28

Match the items below by entering the appropriate code letter in the space provided.
A. Wage and Tax Statement
B. Net pay
C. Federal income taxes
D. FICA taxes
E. Federal unemployment taxes
1. Levied against employees' wages without limit.
2. A payroll tax expense levied only against the employer based on employees' wages.
3. Gross earnings less payroll deductions.
4. A form showing gross earnings and income taxes withheld.
5. Levied against employees' wages with a maximum limit.

Question 29

An employee's payroll check is distributed by the

A) personnel department.
B) payroll department.
C) cashier.
D) treasurer's department.

Question 30

Changes in pay rates during employment should be authorized by the

A) human resources department.
B) payroll department.
C) treasurer's department.
D) timekeeping department.

Question 31

Sam Geller had earned (accumulated) salary of $110,000 through November 30. His December salary amounted to $9,800. Lara Lane began employment on December 1 and will be paid her first month's salary of $7,000 on December 31. Income tax withholding for December for each employee is as follows:
The following payroll tax rates are applicable:
*Less a credit equal to the state unemployment contribution
Instructions
Record the payroll for the two employees at December 31 and record the employer's share of payroll tax expense for the December 31 payroll. Round all calculations to the nearest dollar.

Question 32

Banner Company had the following payroll data for the year:
Assume the following:
Instructions
Compute Banner's payroll tax expense for the year. Make a summary journal entry to record the payroll tax expense.

Question 33

The following payroll liability accounts are included in the ledger of Clementine Company on January 1, 2018:
In January, the following transactions occurred:
Jan. 9 Sent a check for $5,000 to Blue Cross and Blue Shield.
11 Deposited a check for $5,600 in Federal Reserve Bank for FICA taxes and federal income taxes withheld.
14 Sent a check for $400 to the union treasurer for union dues.
18 Paid state income taxes withheld from employees.
21 Paid state and federal unemployment taxes.
22 Purchased U. S. Savings Bonds for employees by writing a check for $1,000.
Instructions
Journalize the January transactions

Question 34

Diane Lane earns a salary of $9,900 per month during the year. FICA taxes are 7.65% on the first $117,000 of gross earnings and 1.45% in excess of $117,000. Federal unemployment insurance taxes are 6.2% of the first $7,000; however, a credit is allowed equal to the state unemployment insurance taxes of 5.4% on the $7,000. During the year, $32,300 was withheld for federal income taxes and $6,700 was withheld for state income taxes.
Instructions
(a) Prepare a journal entry summarizing the payment of Lane's total salary during the year.
(b) Prepare a journal entry summarizing the employer payroll tax expense on Lane's salary for the year.
(c) Determine the cost of employing Lane for the year.

Question 35

Warren Company's payroll for the week ending January 15 amounted to $200,000 for salaries and wages. None of the employees has reached the earnings limits specified for federal or state employer payroll taxes. The following deductions were withheld from employees' salaries and wages:
Federal unemployment tax (FUTA) rate is 6.2% less a credit equal to the rate paid for state unemployment taxes. The state unemployment tax (SUTA) rate is 5.4%.
Instructions
Prepare the journal entries to record the weekly payroll ending January 15 and also the employer's payroll tax expense on the payroll.