9) There are numerous ways to label an employee’s pay. Complete the table to show how each type of
employee pay is generally labeled.
Employee pay
Generally labeled as
Salary
Wages
Commission
Bonus
Benefits
Employee pay
Generally labeled as
Salary
An annual, monthly, or weekly rate
Wages
An hourly rate
Commission
A percentage of a sale amount
Bonus
Pay over and above base salary, usually for
exceptional performance
Benefits
Extra compensation for items such as health,
life, or disability insurance or for retirement
10) Gross pay is the total amount of salary, wages, commissions, and bonuses earned by an employee
during a pay period, after taxes or any other deductions.
11) Gross pay is the total amount of compensation earned by an employee after the deductions are made.
12) Net pay is the total amount of compensation that an employee takes home after the deductions are
made.
13) The employer is required to directly deposit the employee’s take-home pay into the employee‘s bank
account.
14) Regarding gross and net pay, which of the following statements is correct?
A) Gross pay minus all deductions such as income tax withheld equals net pay.
B) Net pay represents the total salaries and wages expense to the employer.
C) For most businesses, gross pay equals net pay.
D) Employers are required to deposit net pay into the employee’s bank account.
15) Regarding net pay, which of the following statements is incorrect?
A) The net pay amount is not important for accounting purposes.
B) The amount of compensation that the employee actually takes home is net pay.
C) The employer either writes a paycheck to each employee for his or her net pay or directly deposits the
employee‘s net pay into the employee‘s bank account.
D) Net pay equals gross pay minus all deductions.
16) The old age, survivors, and disability insurance component of FICA tax is imposed on the entire
amount of an individual employee’s earnings.
17) All earnings are subject to Medicare tax.
18) The employee federal and state income tax and Social Security tax are optional payroll deductions.
19) Income taxes are withheld from the employee’s paycheck.
20) Social Security (FICA) tax is withheld from the employees’ pay and matched by the employer.
21) Andrew, an employee of Super Retailer, Inc., has gross salary for March of $5,500. The entire amount
is under the OASDI limit of $118,500 and thus subject to FICA. The total amount of employee FICA tax is
$841.50. (Assume a FICA—OASDI Tax of 6.2% and FICA—Medicare Tax of 1.45%.)
22) Hank earns $24.00 per hour with time-and-a-half for hours in excess of 40 per week. He worked 50
hours at his job during the first week of March 2018. Hank pays income taxes at 15% and 7.65% for
OASDI and Medicare. All of his income is taxable under FICA. Determine Hank‘s net pay for the week.
(Do not round any intermediate calculations, and round your final answer to the nearest cent.)
A) $1122.00
B) $1021.02
C) $835.80
D) $799.80
23) Which of the following is required to be deducted from employees‘ paychecks?
A) federal income tax
B) SUTA
C) FUTA
D) charitable contributions
24) Which of the following taxes has a ceiling on the amount of annual earnings subject to tax?
A) FICA—OASDI taxes
B) sales tax
C) federal income tax
D) FICA—Medicare taxes
25) Federal income taxes are ________.
A) deducted to arrive at an employee’s gross pay
B) added to arrive at an employee’s net pay
C) deducted to arrive at an employee‘s net pay
D) not borne by the employee
26) Brad’s gross pay for the month is $15,400. His deduction for federal income tax is based on a rate of
18%. He has no voluntary deductions. His year–to-date pay is under the limit for OASDI. What is Brad’s
net pay? (Assume a FICA—OASDI Tax of 6.2% and FICA—Medicare Tax of 1.45%. Do not round any
intermediate calculations, and round your final answer to the nearest dollar.)
A) $11,450
B) $15,400
C) $14,222
D) $12,628
27) Amy’s gross pay for the week is $870.00. Her deduction for federal income tax is based on a rate of
25%. She has voluntary deductions of $245.00. Her year-to-date pay is under the limit for OASDI. What is
her net pay? (Assume a FICA—OASDI Tax of 6.2% and FICA—Medicare Tax of 1.45%. (Round all
calculations to the nearest cent.)
A) $407.50
B) $652.50
C) $585.94
D) $340.94
28) Tony’s gross pay for the month is $2700. Tony‘s deduction for federal income tax is based on a rate of
21%. Tom has no voluntary deductions. Tony’s year–to-date pay is under the limit for OASDI. What is the
amount of FICA tax withheld from Tony’s pay? (Assume a FICA—OASDI Tax of 6.2% and FICA—
Medicare Tax of 1.45%. Do not round any intermediate calculations, and round your final answer to the
nearest cent.)
A) $773.55
B) $206.55
C) $567.00
D) $387.45
29) Angie’s gross pay for the week is $970.00. Her deduction for federal income tax is based on a rate of
20%. She has voluntary deductions of $220.00. Her year-to-date pay is under the limit for OASDI. What is
the amount of FICA—Medicare Tax deducted from her pay? (Assume a FICA—OASDI Tax of 6.2% and
FICA—Medicare Tax of 1.45%. Do not round any intermediate calculations, and round your final answer
to the nearest cent.)
A) $194.00
B) $14.07
C) $60.14
D) $268.21
30) Tim’s gross pay for this month is $8950. His gross year-to-date pay, prior to this month, totaled
$111,500. What is the amount of FICA tax withheld from Tim‘s pay for this month? (Assume an OASDI
rate of 6.2%, applicable on the first $118,500 earnings, and a Medicare rate of 1.45%, applicable on all
earnings. Do not round any intermediate calculations, and round your final answer to the nearest cent.)
A) $434.00
B) $129.78
C) $563.78
D) $554.90
31) Sean’s gross pay for this month is $8750. His gross year–to-date pay, prior to this month, totaled
$112,000. Sean’s rate for federal income tax is 25%. His voluntary deductions total $950. What is Sean’s net
pay? (Assume an OASDI rate of 6.2%, applicable on the first $118,500 earnings, and a Medicare rate of
1.45%, applicable on all earnings. Round any intermediate calculations to two decimal places, and your
final answer to the nearest dollar.)
A) $6032.62
B) $5612.50
C) $6562.50
D) $5082.62
32) Bill’s gross pay for the week is $2150. His deduction for federal income tax is based on a rate of 25%.
He has no voluntary deductions. His year-to–date pay is under the limit for OASDI. What is the amount
of FICA tax that will be withheld from Bill’s pay? (Assume a FICA—OASDI Tax of 6.2% and FICA—
Medicare Tax of 1.45%. Round any intermediate calculations to two decimal places, and your final
answer to the nearest dollar.)
A) $537.50
B) $164.48
C) $701.98
D) $136.50
33) A payroll register is a schedule that summarizes the earnings, withholdings, and net pay for each
employee.
34) Medicare taxes are a required column in a payroll register.
35) The income tax column in a payroll register includes the corporate tax owed by the corporation.