Deck 7: Calculating Pay and Payroll Taxes: the Beginning of the Payroll Process

Question 1

Net pay equals:

A) gross pay less all deductions.
B) regular earnings + overtime earnings.
C) gross earnings less federal and state withholding tax.
D) net earnings + overtime earnings greater than the amount withheld from the employee.

Answer 1

A

Question 2

Bill James earned $800 for the week. If his cumulative earnings are $40,000 prior to this pay period, how much FICA-OASDI must his employer withhold from his earnings? FICA tax rates are OASDI 6.2% on a limit of $128,400. (Round your answer to the nearest whole dollar.)

A) $496
B) $5
C) $50
D) None of the above is correct.

Answer 2

C

Question 3

Dave Brown's cumulative earnings are $104,000, and his gross pay for the week is $5,300. If the FICA rates are: OASDI 6.2% on a limit of $128,400 and Medicare is 1.45%, what are his FICA-OASDI and FICA-Medicare taxes for the week? (Round your answers to the nearest whole dollar.)

A) $3,286; $77
B) $0; $0
C) $329; $8
D) $329; $77

Answer 3

D

Question 4

There are two parts to FICA:

A) old age benefits and defined pension.
B) retirement and income tax withholdings.
C) OASDI and Medicare.
D) defined pension and Medicare.

Question 5

Under the Fair Labor Standards Act, for any hours that an employee works over 40 during a work week:

A) the employee must be paid double.
B) the employee is paid time and a half.
C) the employee must be paid at half-time pay.
D) the employee must be paid at straight-time pay.

Question 6

The Federal Insurance Contributions Act is better known as:

A) FIT.
B) Collection Act.
C) FUTA.
D) FICA.

Question 7

The Fair Labor Standards Act must be followed if:

A) the company has more than 100 employees.
B) the employees have received regular earnings.
C) the company does business in more than one state.
D) the company has less than 50 employees.

Question 8

FICA taxes provide funding to the government to pay:

A) monthly retirement benefits for persons over age 62.
B) medical benefits for persons over age 65.
C) benefits for persons who have become disabled.
D) All of the above are correct.

Question 9

Dave Brown's cumulative earnings are $90,000, and his gross pay for the week is $6,700. If the FICA rates are: OASDI 6.2% on a limit of $128,400 and Medicare is 1.45%, what are his FICA-OASDI and FICA-Medicare taxes for the week? (Round your answers to the nearest whole dollar.)

A) $0; $97
B) $415; $0
C) $415; $97
D) $4,154; $972

Question 10

The law that governs overtime earnings is called:

A) State Wage Control Act.
B) Federal Wage and Hour Law.
C) Fair Labor Standards Act.
D) Both B and C are correct.

Question 11

Payroll taxes include all of the following except:

A) federal income tax.
B) state income tax.
C) FICA-OASDI.
D) All of the above are payroll taxes.

Question 12

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

A) 0
B) 2.5
C) 5
D) 9

Question 13

A company can deem an employee as salaried:

A) if they do not want to pay overtime wages.
B) if the employee meets the salaried laws under the Fair Labor Standards Act.
C) if the employee works at least 40 hours a week for a month.
D) if they have been employed at the company for 1 year or longer.

Question 14

Gross Earnings are the same as:

A) regular earnings only.
B) regular earnings + overtime earnings.
C) net earnings.
D) net earnings + overtime earnings.

Question 15

Jim Barnes' cumulative earnings are $103,000, and his gross pay for the week is $6,400. If the FICA rates are: OASDI 6.2% on a limit of $128,400 and Medicare is 1.45%, what are his FICA-OASDI and FICA-Medicare taxes for the week? (Round your answers to the nearest whole dollar.)

A) $0; $93
B) $0; $0
C) $397; $93
D) $397; $0

Question 16

To compute federal income tax to be withheld:

A) use the net earnings and number of allowances and deduct over-time.
B) use gross earnings, number of allowances, and marital status.
C) use net earnings and Form W-4.
D) None of the above answers are correct.

Question 17

A pay period is defined as:

A) weekly.
B) biweekly.
C) monthly.
D) All of the above are correct.

Question 18

Compute employee FICA taxes for the year on earnings of $114,000 at 6.2% on a limit of $128,400 for OASDI and 1.45% for Medicare. (Round your answer to the nearest whole dollar.)

A) $7,068
B) $8,721
C) $1,653
D) $87,210

Question 19

The number of allowances claimed by an employee determines how much will be withheld from their paycheck for:

A) FICA-OASDI.
B) FICA-Medicare.
C) federal income tax.
D) Both A and B are correct.

Question 20

Jim Stein's hourly wage is $40.00, and he worked 42 hours during the week. Assuming an overtime rate of time and a half over 40 hours, Jim's gross pay is: (Round your answer to the nearest whole dollar.)

A) $1,720.
B) $1,680.
C) $1,760.
D) $1,840.

Question 21

A calendar year is:

A) any 12-month period.
B) a 12-month period beginning January 1 and ending on December 31.
C) always the same as the company's fiscal year.
D) None of the above answers are correct.

Question 22

A work week is 160 hours in length.

Question 23

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

A) gross pay.
B) net pay.
C) earnings for the period and cumulative earnings.
D) W-4.

Question 24

On June 15, Bob Love earned $3,000 and has the following deductions: FICA-OASDI 6.2%, FICA-Medicare 1.45%; federal income tax of $300; and state income tax $40. What is his net pay? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole dollar.)

A) $2,471
B) $2,431
C) $2,731
D) $2,771

Question 25

Todd earns an hourly rate of $30 and had taxes withheld totaling $240. What would his net earnings be if he worked 42 hours (assuming double time over 40 hours)?

A) $1,080
B) $1,320
C) $1,020
D) $1,050

Question 26

Ken Jenkins earns $75,000 per year. What is her net pay for the month ended January 31, if FICA tax rates are: 6.2% for OASDI and 1.45% for Medicare; federal income tax is 20%; and union dues are $400 per month? (Round any intermediate calculations to two decimal places, and your final answer to the nearest whole dollar.)

A) $4,522
B) $4,122
C) $5,850
D) $5,372

Question 27

Vance Johnson works 44 hours as a coffee barista and earns $17 per hour. Compute her weekly pay assuming an overtime rate of 1.5.

A) $748
B) $782
C) $816
D) $884

Question 28

Robert Smith's hourly rate is $35.00, and he worked 31 hours during the week. What is his gross pay for the week? (Round your answer to the nearest whole dollar.)

A) $1,085
B) $543
C) $1,400
D) $1,103

Question 29

Employers pay the following payroll taxes:

A) FICA-OASDI.
B) Federal income tax.
C) State unemployment tax.
D) A and C.

Question 30

Pam received $1,800 for working 40 hours. What was Pam's rate of pay per hour? (Round your answer to the nearest dollar.)

A) $45
B) $72,000
C) $30
D) $1,800

Question 31

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

A) W-4 form.
B) W-2 form.
C) 1040 form.
D) All of these answers are correct.

Question 32

When calculating the employee's payroll, the clerk forgot about the wage base limits. What impact could this error cause on the employee's check?

A) FICA-OASDI could be overstated.
B) FUTA could be overstated.
C) SUTA could be overstated.
D) All of these could be correct.

Question 33

Another name for the Fair Labor Standards Act is:

A) Federal Insurance Act.
B) Federal Wage and Hour Law.
C) Federal Income Tax Act.
D) Federal Wage and Work Law.

Question 34

Jane works 45 hours at a rate of pay of $18 per hour. She receives double pay over 40 hours. What is her gross pay?

A) $855
B) $990
C) $810
D) $900

Question 35

Net pay is the same as:

A) gross pay.
B) take-home pay.
C) before taxes pay.
D) pay before deductions.

Question 36

Which of the below allowances would have the most amount of taxes withheld for federal income tax purposes?

A) S-1
B) S-0
C) S-3
D) S-2

Question 37

A W-4 form:

A) shows total gross wages earned for the year.
B) determines the amount of FICA-Medicare to be withheld.
C) provides the number of allowances an employee has claimed.
D) shows total net wages earned for the year.

Question 38

An allowance or exemption represents a certain amount of a person's income that will be considered nontaxable.

Question 39

Compute net earnings on March 3, when gross (taxable) pay equals $750. FICA-OASDI tax rates are 6.2%, FICA-Medicare rate is 1.45%, federal income tax $71.00, and state income tax $15.00. (Round your answer to the nearest whole dollar.)

A) $622
B) $678
C) $607
D) $693

Question 40

Which of the below allowances would have the most amount of taxes withheld for federal income tax purposes?

A) S-1
B) S-0
C) S-3
D) S-2

Question 41

All states charge a state income tax.

Question 42

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

Question 43

Regular earnings include hours of overtime pay earned during the weekend.

Question 44

All employees must contribute to Federal and State income tax.

Question 45

List the purposes of the Federal Insurance Contributions Act.

Question 46

Explain what is meant by the cumulative gross earnings.

Question 47

What is the purpose of the Fair Labor Standards Act?

Question 48

All states use the same percent for the state tax rate.

Question 49

Both parts of FICA, OASDI and Medicare have the same maximum earnings limits.

Question 50

FICA-Medicare provides for medical benefits after age 65.

Question 51

From the following information, complete the chart for gross earnings for the week. Assume an overtime rate of time and a half over 40 hours.

Question 52

Net pay is equal to gross pay less the amount withheld for federal income tax.

Question 53

When an employee's earnings are greater than FICA base limit during the calendar year, no more FICA-OASDI tax is deducted from earnings.

Question 54

A maximum earnings limit is set for all FICA taxes.

Question 55

To have less money withheld from your paycheck, an employee can claim more allowances than they actually have.

Question 56

An employee earns $28 per hour.
She worked 50 hours the third week of January (assume time and a half for overtime)
Calculate the net pay.
The business is involved in interstate commerce.
Federal Income Tax rate = 20%
State Income Tax rate = 5%
FICA rate OASDI = 6.2% and Medicare = 1.45%
FUTA rate = .8%
SUTA rate = 5.6%
$ ________

Question 57

Calculate the total wages earned for each employee (assume an overtime rate of time and a half over 40 hours):
a) Sam earns $25 per hour and worked 45 hours in one week.
b) Jim earns $20 per hour and worked 42 hours in one week.

Question 58

The amount withheld for FICA is based on the W-4 form.

Question 59

Gross pay is the amount that the employee takes home.

Question 60

Gross pay is equal to take-home pay less federal withholdings.

Question 61

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

A) W-2.
B) W-4.
C) payroll register.
D) employee earnings record.

Question 62

A summary record of each person's earnings, deductions, and net pay is called a(n):

A) payroll register.
B) W-4.
C) employee individual earnings record.
D) general journal.

Question 63

The payroll information for a pay period is recorded in the general ledger.

Question 64

The employee earnings record:

A) shows all employee information related to an entire pay period.
B) keeps track of an individual employee's payroll history for a calendar year.
C) is a substitute for a W-4.
D) None of the above is correct.

Question 65

Which tax does NOT have a wage base limit?

A) State unemployment tax
B) Federal unemployment tax
C) FICA-Medicare
D) FICA-OASDI

Question 66

Compute the net pay for each employee. The FICA tax rate is: OASDI 6.2% on a limit of $128,400; Medicare is 1.45%; federal income tax is 15%; state income tax is 5%; and medical insurance is $100 per employee.

Question 67

An employee has gross earnings of $2,400 with withholdings of 6.2% FICA-OASDI, 1.45 % FICA-Medicare, $100 for federal income tax and $40 for state income tax. How much is the gross pay? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest whole dollar.)

A) $2,400
B) $2,076
C) $2,116
D) $2,176

Question 68

An employee earns $16 per hour. He worked 45 hours the last week of January (assuming time and a half for overtime).
Calculate the total amount of employee deductions.
The business is involved in interstate commerce.
Federal Income Tax rate = 20%
State Income Tax rate = 5%
FICA rate OASDI = 6.2% and Medicare = 1.45%
FUTA rate = .8%
SUTA rate = 5.6%
$ ________

Question 69

An employee earns $35 per hour. She worked 51 hours the third week of January.
Calculate the gross pay.
The business is involved in interstate commerce.
Federal Income Tax rate = 20%
State Income Tax rate = 5%
FICA rate OASDI = 6.2% and Medicare = 1.45%
FUTA rate = .8%
SUTA rate = 5.6%
$ ________

Question 70

Workers' Compensation Insurance is:

A) paid by the employer to protect the employee against job-related injury or death.
B) paid by the employee to protect himself/herself against job-related accidents or death.
C) paid by the employer to protect the employee against non-job-related injury or death.
D) paid by the employee to protect himself/herself against non-job-related accidents and death.

Question 71

Why would a business decide to use an external company to prepare their payroll checks and related reports?

Question 72

An employee has gross earnings of $1,800 with withholdings of 6.2% FICA-OASDI, 1.45% FICA-Medicare, $50 for federal income tax and $30 for state income tax. How much is the net pay? (Round any intermediate calculations to the nearest cent, and your final answer to the nearest whole dollar.)

A) $1,612
B) $1,632
C) $1,582
D) $1,662

Question 73

The taxable earnings column of the payroll register records the tax due.

Question 74

The use of a payroll register to record a company's payroll is not optional.

Question 75

The employees collectively earn a gross wage of $90,000 for the pay period, but the employer says that they cost $97,000. Discuss the discrepancy.

Question 76

Betsy's Auction House's payroll for June includes the following data: What is the net pay? (Round intermediary calculations to the nearest cent and final answers to the whole dollar.)

A) $2,767
B) $1,667
C) $2,367
D) $2,067

Question 77

Which report would an employer review if they wanted to check how much an employee has earned to date?

A) Individual employee earnings record
B) Payroll register
C) Accounts payable ledger
D) A and B.

Question 78

The payroll register:

A) is a worksheet.
B) is a journal for recording payroll entries.
C) keeps track of an individual employee's payroll history for a calendar year.
D) is a log for employees to sign in and out of work.

Question 79

The payroll register includes sections for recording:

A) gross pay, deductions, and net pay.
B) assets, liabilities, equity, revenues, and expenses.
C) employee home address and phone number.
D) accrued expenses, unearned revenues, and net pay.

Question 80

What is required of an employer by the Federal Insurance Contributions Act?