Deck 7: Employee Earnings and Deductions

Question 1

The total amount of employee compensation before deductions are taken out is referred to as

A) gross pay.
B) net pay.
C) compensation after withholdings.
D) take-home pay.
E) merit pay.

Answer 1

A

Question 2

The more _____ an employee claims, the less income tax an employer withholds from the employee's paycheck.

A) withholding tax
B) withholding exemption
C) withholding allowance
D) withholding period
E) withholding premium

Answer 2

C

Question 3

All of the following are payroll taxes that are expenses of the employer except

A) FICA Social Security taxes.
B) employee income taxes.
C) state unemployment taxes.
D) federal unemployment taxes.
E) FICA Medicare taxes.

Answer 3

B

Question 4

Net pay is equal to

A) take-home pay plus all deductions.
B) take-home pay minus all deductions.
C) gross pay plus all deductions.
D) gross pay minus all deductions.
E) gross pay minus only federal and state income taxes.

Question 5

The employer records the amount of federal income tax withheld as

A) an expense.
B) an asset.
C) payroll tax expense.
D) a liability.
E) a contra asset.

Question 6

Types of deductions from employees' earnings include

A) repayment of personal loans from a company credit union.
B) savings through a company credit union.
C) hospital and life insurance premiums.
D) all of these.
E) none of these.

Question 7

The portion of FICA taxes designated as Medicare is paid by

A) employees only.
B) the employer and the federal government.
C) both the employee and the employer.
D) either the employer or the employee, depending on the labor contract.
E) neither the employee nor the employer.

Question 8

Types of compensation that an employee might receive include

A) a bonus.
B) cost of living adjustments.
C) profit sharing.
D) a commission.
E) all of these.

Question 9

The structure of the payroll entry to record the payroll is

A) debit Wages Payable; credit each employee deduction.
B) debit Wages Payable; credit Cash.
C) debit Wages Expense; credit each employee deduction; credit Salaries Payable.
D) debit Wages Expense; credit each employee deduction.
E) debit Wages Payable; credit Sales Expense; and credit Cash.

Question 10

All of the following are optional deductions except

A) charitable contributions.
B) medical insurance.
C) union dues.
D) Medicare tax.
E) life insurance.

Question 11

For which of the following taxes is there no ceiling on the amount of annual employee earnings subject to the tax?

A) Federal income tax
B) Federal unemployment tax
C) FICA SS tax
D) Charitable contributions tax
E) State unemployment tax

Question 12

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

A) Only the FICA tax
B) Only the FICA tax and the federal unemployment tax
C) Only the state and federal unemployment taxes
D) The FICA medicare tax and the state and federal unemployment taxes
E) Only the Medicare tax

Question 13

The record maintained for each employee, listing the current data on that employee's earnings for the period, deductions, and accumulated earnings, is the

A) employee's individual earnings record.
B) payroll register.
C) employee's wage and tax statement.
D) employee's withholding allowance (W-4) certificate.
E) Social Security record statement.

Question 14

Mia's employer pays time-and-a-half for all hours worked in excess of 8 hours per day and double time for all hours worked on Sundays. Mia's regular hourly rate is $10 per hour. During the week, Mia worked the following hours: Monday, 9; Tuesday, 10; Wednesday, 8; Thursday, 9; Friday, 8; Sunday, 5. Total gross wages are:

A) $560.00.
B) $528.00.
C) $630.00.
D) $650.00.
E) $640.00.

Question 15

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

A) the payroll register.
B) the employee's individual earnings record.
C) time cards.
D) Form W-4.
E) the general ledger.

Question 16

A person who performs a service for a fixed amount and is not under the specific direction of the party being served is called

A) an employer.
B) an employee.
C) an independent contractor.
D) either an employer or an employee.
E) a company's manager.

Question 17

Jenny receives an annual salary of $51,000 plus a 10 percent commission on all sales during the year in excess of $200,000. Her sales for the year total $420,000. Her total earnings amount to _____.

A) $73,000
B) $56,100
C) $93,000
D) $71,000
E) $51,000

Question 18

An employer may withhold portions of an employee's total earnings for

A) state and county sales taxes.
B) charitable contributions.
C) local property taxes.
D) state unemployment taxes.
E) federal unemployment taxes.

Question 19

In a payroll entry, a credit to Accounts Receivable indicates that

A) an employee is paying a bill owed to the company.
B) a customer is paying a bill owed to the company.
C) the employer is paying a bonus to the employee.
D) a mistake has been made in an employee's paycheck.
E) the company underpaid the employee the previous pay period.

Question 20

Regarding the federal income tax withholding tables, the amount of each employee's earnings withheld is affected by the

A) number of exemptions claimed.
B) age of the employee.
C) number of years working for the company.
D) state where the employer is located.
E) number of years the company has been in business.

Question 21

Employees may be paid hourly or salary based on the following:

A) Type of work performed
B) Period of time covered
C) The employer's discretion
D) a & b

Question 22

The Fair Labor Standards Act of 1938 provides for:

A) minimum standards for wages and overtime.
B) provisions for dependent people.
C) exemptions for spouses.
D) benefits for retired workers.

Question 23

The employee's individual earnings record includes

A) gross payroll for the pay period for all employees.
B) net payroll for the pay period for all employees.
C) the date the employee was hired.
D) the amount of federal unemployment taxes for the pay period.
E) the total amount of FICA and Medicare tax paid by the company for all employees.

Question 24

Stacey works 38 hours in a week. How many hours of overtime will Stacey be paid?

A) 0
B) 3
C) 8
D) Can't be determined from information

Question 25

Emma Parker is hired as a tailor. Emma's pay will be based on a piece-rate system at the rate of $10 per shirt stitched. Emma stitches 10 shirts a day and works 5 days a week. Which of the following figures is Emma's total earnings for one week?

A) $100
B) $50
C) $500
D) $700

Question 26

Olivia worked 46 hours during the week at an hourly rate of $16 per hour. Assume that Olivia's overtime rate is paid at time and a half over 40 hours. What is Olivia's gross pay for the week?

A) $1,104
B) $880
C) $784
D) $688

Question 27

The 941 employer's tax payment to the IRS consists of

A) Employee's FICA Withheld
B) Employer's matching FICA
C) Employee's federal income tax withheld
D) a & b
E) All of the above

Question 28

The Social Security Act of 1935 was originally enacted to provide

A) Benefits for Spouses
B) Benefits for Minor Children
C) Benefits for Retired Workers
D) Disability Insurance

Question 29

Flexible spending plans and 401(k) deductions are normally considered

A) Tax free earnings
B) Pre-tax deductions
C) Post-tax deductions
D) Normal tax deductions

Question 30

Which of the following is true about the Federal Insurance Contributions Act?

A) It provides early retirement benefits after a worker reaches age 65.
B) It provides retirement benefits to workers who become disabled after age 68.
C) It provides a health insurance program for workers after age 65.
D) It provides free health insurance for the dependents of all workers.

Question 31

Which of the following payroll taxes is the employee's responsibility?

A) Federal Income Tax, FICA SS & Medicare, FUTA
B) Federal Income Tax, FUTA, SUTA
C) Federal Income Tax, FICA SS & Medicare
D) FICA SS & Medicare, FUTA, SUTA

Question 32

Net pay is the same as

A) Total earnings
B) Take home pay
C) Earnings before taxes
D) Pay before deductions

Question 33

Julie is employed as a salesperson at ABC Motors. She receives a salary of $1,200 a month, plus 15% commissions on the profit from her sales during the month. If Julie's sales profit for August is $25,000 what is her total gross pay?

A) $1,200
B) $3,750
C) $2,550
D) $4,950

Question 34

What are the two parts of FICA taxes?

A) Medical and Disability
B) Social Security and Disability
C) Social Security and Medicare
D) FUTA and SUTA

Question 35

A law that regulates overtime earnings is called:

A) Federal Unemployment Tax Act
B) Tax Payment Act
C) Fair Labor Standards Act
D) Federal Insurance Contribution Act

Question 36

The following payroll taxes that are strictly the employer's responsibility

A) SUTA
B) FUTA
C) FICA SS Employee Withheld
D) Federal Tax Withheld
E) a & b

Question 37

John Smith is paid $15 per hour and he worked 35 hours during the week. What is John's gross pay?

A) $450
B) $525
C) $975
D) $1,050

Question 38

Michael Cruz works 45 hours at a bakery, earning $12.50 per hour. Michael is entitled to overtime pay for all hours worked in excess of 40 hours at 1.50 times his regular hourly rate. Calculate Michael's weekly pay. Give the answer to two decimal places.

A) $562.50
B) $593.75
C) $568.75
D) $703.75

Question 39

What item is NOT used to calculate the federal income tax to be withheld by employers?

A) Total Earnings
B) W-2
C) Publication 15 (Circular E)
D) W-4

Question 40

The source of information for the employee's individual earnings record is

A) the payroll register.
B) Form W-2.
C) Form W-4.
D) employees' time cards.
E) the general ledger.

Question 41

An example of who is NOT most likely under the direct control of an employer and classified as an independent contractor.

A) Clerical Worker
B) Factory Worker
C) Janitor
D) Janitorial Service

Question 42

A plumber who sets his own work schedule is an example of:

A) Independent Contractor
B) Employee
C) Employer
D) Freelancer

Question 43

The W-4 form lists all of all of the following EXCEPT one:

A) Lists the number of allowances claimed
B) Shows the filing status
C) Lists the employee's Social Security Number
D) Lists the total wages to be earned

Question 44

An independent contractor is one who is under the direct control of an employer.

Question 45

Mike earns wages of $1,000. He increases the number of allowances claimed from 2 to 4. The amount of income tax to be withheld:

A) will increase.
B) will decrease.
C) will not change.
D) will double.

Question 46

A twelve-month period beginning on January 1 and ending on December 31 of the same year is called a:

A) Fiscal Year
B) Annual Year
C) Accounting Year
D) Calendar Year

Question 47

A carpenter who decides his own hours is an example of an independent contractor.

Question 48

Which of the following would NOT be an employee payroll deduction?

A) Federal Income Tax
B) State Income Tax
C) 401(k)
D) FUTA

Question 49

Sophia received $730 for working 40 hours. What is Sophia's hourly rate of pay?

A) $18.00
B) $18.04
C) $18.25
D) $18.50

Question 50

The payroll register contains all of the following except:

A) Hours Worked
B) Cumulative Earnings
C) Federal Income Tax
D) W-4 Form

Question 51

Federal unemployment laws protect employees and their dependents against losses due to death or injury incurred on the job.

Question 52

Gross pay is the total amount of salary or wages before deductions and taxes.

Question 53

Jerry Whiten is paid a commission of 15% on sales he makes for XYZ Motors. What are Jerry's total earnings if he sold $55,000 last month?

A) $46,750
B) $8,250
C) $63,250
D) None of the above

Question 54

Ashley earns an hourly rate of $15 and worked 48 hours in one week. She had taxes withheld totaling $175 and union dues deducted for $50. Assuming that Ashley receives overtime at a rate of 1.5 what would her net earnings be for the week?

A) $495
B) $555
C) $605
D) $225

Question 55

Net pay is calculated as gross pay plus the FICA tax and the Medicare tax.

Question 56

A law that protects employees and dependents against losses due to death or injury on the job is:

A) Fair Labor Standards Act
B) Federal Wage and Hour Act
C) Worker's Compensation Laws
D) Social Security Act of 1935

Question 57

Pre-tax deductions mean

A) Taxes are calculated before deductions
B) Employee deductions that are not subject to income tax
C) Employees are subject to all taxes on the deduction
D) Taxes are optional

Question 58

In a payroll journal entry, a credit to Federal Withholding Tax Payable indicates

A) Federal taxes have been withheld from the employee and are a liability until paid to the governing agency
B) Federal taxes have been paid to the governing agency
C) Federal taxes are due to be withheld from the employee
D) None of the above

Question 59

Which of the following statements is true about FICA Social Security and Medicare?

A) Employers match the employee's deduction for FICA Medicare but pay a higher percentage for FICA Social Security.
B) Only employees have this deduction.
C) Only employers are responsible for FICA taxes.
D) Both FICA Social Security and Medicare have no wage ceilings.

Question 60

Totals for payroll journal entries are obtained from:

A) a payroll register
B) an employee's pay check
C) a W-4 statement
D) a payroll bank account

Question 61

Assuming that a payroll bank account is used, when the payroll is initially recorded, Salaries Payable is credited for total take-home pay.

Question 62

There is no ceiling on each employee's total earnings that are subject to federal income tax.

Question 63

Optional deductions would include employee income tax, Social Security tax, union dues, and insurance premiums.

Question 64

If an employee earning $10 per hour works 46 hours, the gross pay would amount to $490, assuming time-and-a-half for over 40 hours worked per week.

Question 65

The FICA Tax Payable account is usually used for both the employees' and the employer's share of FICA taxes (Social Security and Medicare).

Question 66

State and federal unemployment taxes are two required payroll deductions for employees.

Question 67

There is no limit on each employee's total earnings that are subject to Medicare tax.

Question 68

Social Security taxes and Medicare taxes are paid by both the employer and the employee.

Question 69

Employees who are paid a regular salary are not entitled to premium pay for overtime.

Question 70

The payroll register contains the earnings of all the employees for the pay period.

Question 71

If employees are paid by checks from the firm's regular bank account, the Salaries Payable account is necessary in the payroll entry.

Question 72

An employee's total earnings for a payroll period are called gross pay.

Question 73

Businesses with several employees may prefer to maintain a separate checking account for the payment of payroll.

Question 74

A person who works for compensation under the direction and control of the employer is called an independent contractor.

Question 75

All payroll deductions withheld from employees become an expense for the employer.

Question 76

The Medicare tax is 6.2 percent of unlimited gross earnings.

Question 77

In determining whether an employee's accumulated earnings have reached the maximum amount subject to FICA tax deductions, the employer must use the calendar year, even if the business operates on a fiscal year ending June 30.

Question 78

Money paid to a person for managerial or administrative services is usually called wages, and the time period covered is usually hours or weeks.

Question 79

The amount of federal income tax withheld from an employee's paycheck is affected by whether the employee claims to be single or married on the W-2 form.

Question 80

Gross pay less one or more deductions equals net pay.