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Payroll EXAM
What is FICA? correct answer -Federal Insurance Contributions Act -Made up of social security and medicare -levies taxes on all employees (even self-employed) 2020 Social Security Tax Rate correct answer 6.2% of the first $137,700 in wages. Both employee and employer is 6.2%. Not subject to social security taxes if wages exceed this amount. This amount is DOUBLED for those who are self employed, 12.4% Medicare tax rate correct answer 1.45% no cap (no wage limit on this tax) 2.9% for those who are self employeed The combined rate for the Social Security tax and the Medicare tax to be withheld from each employee's gross wages up to $137,700 in 2020 is correct answer 7.65% The amount of FICA that should be withheld from an employee's salary of $150,000 in the year 2020 is correct answer $10,712. Social Security tax of $8,537.40 (6.2% X $137,700) PLUS Medicare tax of $2,175 (1.45% X $150,000) The pay earned by hourly-paid employees is usually referred to as correct answer wages The pay earned by managers who are paid semi-monthly is referred to as correct answer salary/salaries
Which employee payroll classification will likely require an accrual adjusting entry for the gross salaries or wages at the end of a calendar month? correct answer hourly employees paid weekly
- because they have their paydays approximately one week after their workweeks and generally the workweek does not end on the last calendar day of the month. The federal form on which an employee indicates the number of allowances to be used by the employer when calculating the federal income tax withholding is the correct answer W-4 Form An example of a court-ordered employee withholding is correct answer garnishment or child support Garnishment correct answer A court ruling that requires that money be deducted from a person's paycheck involuntarily in order to pay a debt. The amount that an employee "clears" or "takes home" is the correct answer NET pay Income BEFORE taxes and deductions are taken correct answer GROSS pay Amount of income left after taxes and deductions have been taken out. correct answer Net Pay (take home pay) A tax paid by the employer that is 0.6% of each employee's first $7,000 of annual salary or wages is correct answer federal unemployment tax A cost paid by the employer to cover an employee's work-related injury is correct answer workers compensation insurance
In January 2020 an employer remits the state unemployment tax that pertains to its employees' wages for the final three months of 2019. On which income statement will the state unemployment tax expense appear under accrual accounting? correct answer 2019 An employer has computed the following amounts for its employee Mary during a week in January: gross wages $500.00; FICA tax withheld $38.25; federal income tax withholding $67.25; State income tax withholding $20.00; unemployment taxes $24.00; worker compensation insurance $5.00. The company does not provide health insurance, paid vacations, or any other benefits. correct answer The amount of Mary's net pay is: correct answer $374. Gross wages of $500.00 less withholdings of $38.25 for FICA and $87.25 for federal and state income taxes (67.25 + 20) The employer's total expense for Mary's employment during the week is correct answer $567. Gross wages of $500.00 + employer's portion of FICA $38.25 ($500.00 X employer rate of 7.65%) + unemployment tax of $24.00 + worker comp insurance of $5.00. How many weeks are in a year? correct answer 52 weeks in a year How many pay days in biweekly payroll? correct answer 26 52 weeks divided by 2 weeks How many pay days in semimonthly payroll? correct answer 24 12 months times 2 weeks If you get paid biweekly with an annual salary of 52,000, what will you get paid (gross pay) biweekly? correct answer $2,000 biweekly 52,000 divided by 26
If you get paid semimonthly with an annual salary of 52,000, what will you get paid (gross pay) semimonthly? correct answer $2,166. 52,000 divided by 24 payroll withholding taxes correct answer taxes that an employer is required to deduct from its employees' gross wages, salaries, bonuses, and other compensation. examples of payroll withholding taxes correct answer FICA (social security and medicare), federal income tax, state income tax, additional medicare tax Additional Medicare Tax correct answer 0.9% Medicare tax on wages exceeding $200, during a calendar year Sam makes $300,000 gross pay a year. He must pay the additional medicare tax. How much in additional medicare tax will he pay? correct answer $ $300,000 less $200,000 multiplied by. An employer must match what? correct answer An employee's FICA taxes This means the employer pays the same amount of employee's FICA taxes. This will be sent to proper government department. When do you get paid double time? correct answer When you work more than 12 hours in one day. When do you get paid time and a half? correct answer When you work more than 8 hours, but do not exceed 12, in one day.
Any amount not expected to be paid within one year is a _____________ correct answer noncurrent or long term asset How do you record a loan to an employee? correct answer Debit "loan to employee" Credit "cash" If a company loans $5,000 to an employee for a family emergency, what is the proper entry to record? correct answer Debit loan to employee for $5, Credit cash for $5, Accrual Accounting correct answer recording in each fiscal period applicable expenses, whether paid or not, and income earned, whether collected or not. accrued payroll correct answer Amount earned by employees but not yet paid to them. This is a liability. Under the accrual method of accounting, at each balance sheet date the company should record any accrued interest by... correct answer Debiting interest receivable Crediting interest income When an employee makes a payment on his loan, the company will debit _______________ and credit _________________ for the appropriate amounts correct answer Debit cash Credit Interest receivable and loan to employee fringe benefits correct answer Any financial extras beyond the regular pay check, such as health insurance, life insurance, paid vacation and/or retirement What is a fringe benefit rate? correct answer A PERCENTAGE that results from dividing the cost of an employee's fringe benefits by the wages paid to the employee for the hours actually worked
Let's assume that a company operates 5 days a week for 8 hours a day for 52 weeks a year resulting in a total of 2,080 hours per year. Next, let's assume that during the year an employee earns $20 per hour, and is entitled to 25 days or 200 hours off with pay (vacation, holidays, sick days). What are the employee's wages for WORKING on the job? correct answer $37, (2,080 hours minus the 200 hours off with pay multiplied by the pay rate) this translate to 1880 x 20 Let's assume the following are the annual costs for the fringe benefits earned by the employee and paid by the employer: $4,000 for paid time off (200 hours X $20) $7,000 for the employee's health, life and disability insurances $2,000 for the employee's retirement benefits $1,000 for worker compensation insurance and unemployment tax $3,000 for the employer's portion of the Social Security and Medicare taxes What is the sum of the fringe benefits? correct answer $17, This is paid for by the employer What is the fringe benefits rate for this employee? correct answer 45.2% (17,000 divided by 37,600) What is the fringe benefit cost per hour? correct answer $9. (Fringe benefits cost divided by hours actually worked) translates to (17,000 divided by 1880)
payroll register correct answer An accounting form that summarizes the earnings, deductions, and net pay of all employees for one pay period. reference inquiry form correct answer document used by the employer to investigate the references given on the application blank by the job applicant. piece-rate system correct answer a compensation system under which employees are paid a certain amount for each unit of output they produce What is the name of the division within the Department of Labor that is responsible for carrying out federal laws the regulate the wages and hours of workers in businesses engaged in interstate commerce? correct answer wage and hour division The Wage and Hour Division allows the practice of recording an employee's starting and stopping time to: A) the nearest five minutes. B) the nearest tenth of an hour. C) the nearest quarter of an hour. D) all of the above. E) none of the above. correct answer D, all of the above principal activities correct answer those tasks employees must perform for the employer. self-employment tax correct answer The total Social Security and Medicare tax, including employer-matching contributions, paid by people who work for themselves. What is the total self-employment tax? correct answer 15.3% (12.4% for social security and 2.9% for medicare)
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