70) Tan’s gross pay for the week is $1500. His year-to-date pay is under the limit for OASDI. Assume that
the rate for state and federal unemployment compensation taxes is 6% and that Tan’s year–to-date pay
has previously exceeded the $7000 cap. What is the amount of state and federal unemployment tax that
his employer must record as payroll tax expense and pay to the federal and state governments?
A) $0
B) $21.75
C) $111.75
D) $90
71) Jason’s gross pay for the week is $1900. His year-to–date pay is under the limit for OASDI. Assume
that the rate for state and federal unemployment compensation taxes is 6% and that Jason’s year-to-date
pay has not yet exceeded the $7000 cap. What is the total amount of payroll taxes that his employer must
record as payroll tax expenses? (Do not round your intermediate calculations. Assume a FICA—OASDI
Tax of 6.2% and FICA—Medicare Tax of 1.45%.)
A) $107.35
B) $117.80
C) $259.35
D) $233.74
72) Jack’s gross pay for the week is $1400. His year–to-date pay is under the limit for OASDI. Assume that
the rate for state and federal unemployment compensation taxes is 6% and that Jack’s year–to-date pay
has previously exceeded the $7000 cap. What is the total amount of payroll taxes that Jack’s employer
must record as payroll tax expenses? (Do not round your intermediate calculations. Assume a FICA—
OASDI Tax of 6.2% and FICA—Medicare Tax of 1.45%.)
A) $86.80
B) $58.80
C) $20.30
D) $107.10
73) Which of the following is included in the entry to record the employer’s payroll taxes?
A) a debit to State Unemployment Tax Payable
B) a credit to Payroll Tax Expense
C) a credit to FICA—OASDI Tax Payable
D) a credit to Salaries Payable
74) Dan Jones and Pat Smith are two employees of Lone Star, Inc. In January 2019, Dan’s gross pay was
$11,500, and Pat‘s gross pay was $15,400. All earnings are subject to FICA—OASDI Tax of 6.2% and
FICA—Medicare Tax of 1.45%. Which of the following would be included in the entry to record the
payroll tax expense to be paid out by Lone Star, Inc. for January?
A) a debit to Salaries Payable to employees for $390.05
B) a debit to FICA—OASDI Taxes Payable for $390.05
C) a credit to FICA—Medicare Taxes Payable for $390.05
D) a credit to Salaries Expense for $390.05
75) Jack, an employee of Desert Sky, Inc., has gross salary for May of $9000. The entire amount is under
the OASDI limit of $118,500 and thus subject to FICA. He is also subject to federal income tax at a rate of
21%. Which of the following is a part of the journal entry for accrual of the employer payroll taxes?
(Assume a FICA—OASDI Tax of 6.2% and FICA—Medicare Tax of 1.45%.) Jack’s income to date exceeds
the FUTA and SUTA tax income limits.
A) credit to Salaries Payable for $9000
B) debit to Cash for $6601.50
C) debit to Employee Income Taxes payable of $1890.00
D) credit to FICA—Medicare Taxes Payable of $130.50
76) Jason, an employee of Fitzgerald, Inc., has gross salary for March of $4,000. The entire amount is
under the OASDI limit of $118,500, and thus subject to FICA. His year–to-date pay has already exceeded
the $7,000 cap for FUTA and SUTA. Which of the following is a part of the journal entry to record the
employer’s payroll taxes?
A) credit to Payroll Tax Expense
B) debit to FICA Taxes Payable
C) credit to FICA—Medicare Taxes Payable
D) debit to Cash
77) Lawrence, an employee of Light, Inc., has gross salary for March of $4,000. The entire amount is under
the OASDI limit of $118,500, and thus subject to FICA. His year-to-date pay has already exceeded the
$7,000 cap for FUTA and SUTA. Which of the following is a part of the journal entry to record the
employer’s payroll taxes?
A) debit to Payroll Tax Expense
B) debit to FICA Taxes Payable
C) credit to Payroll Tax Expense
D) debit to Cash
78) Doug, an employee of Cayman Travels, Inc., has gross salary for March of $4,000. The entire amount
is under the OASDI limit of $118,500, and thus subject to FICA. His year–to-date pay has already
exceeded the $7,000 cap for FUTA and SUTA. Provide the journal entry to record the employer‘s payroll
taxes. (Assume a FICA—OASDI Tax of 6.2% and FICA—Medicare Tax of 1.45%.) Omit explanation.
79) Establishing controls for efficiency of the payroll process is one of the main key controls for payroll.
80) Direct deposits decrease the efficiency of the payroll process because of cyber issues.
81) The Human Resources Department employees should pass out paychecks, hire employees, and fire
employees.
82) Which of the following is an important aspect of control over payroll?
A) controls to limit salaries and wages so that they are no higher than competitors
B) controls for efficiency in payroll procedures
C) controls to screen potential employees for criminal records
D) controls to monitor employee behavior, such as use of security cameras
83) Which of the following is a reason why many companies require a photo ID when employees pick up
their paychecks?
A) to make sure an employee’s work hours have been accurately reported
B) to avoid writing a paycheck to a fictitious person
C) to improve efficiency of the payroll disbursement process
D) to make sure all employees are legal adults
84) Which of the following is true of good internal controls over payroll?
A) Accounting for payroll should be separate from hiring and firing of employees.
B) Disbursement of paychecks should not be separate from the function of maintaining payroll records.
C) Hiring and firing employees should not be separated from accounting and from disbursing paychecks.
D) Cash receipts from customers should be separated from the accounting for accounts receivable.
85) Which of the following is a control risk related to payroll?
A) theft of inventory by staff
B) a dishonest employee cashing a paycheck that was written to a fictitious person
C) expenses being recorded as assets in order to manipulate earnings
D) contracts being awarded to relatives of employees
86) Which of the following is a control procedure to prevent a dishonest employee from cashing a
paycheck that was written to a fictitious person?
A) having employees clock in and out of work
B) keeping computerized records of payroll data
C) serial numbering of paychecks
D) requiring photo IDs for employees picking up their paychecks
87) Which of the following is an important internal control over payroll?
A) separating the duties of the disbursement of paychecks from the recording of payroll transactions in
the ledger
B) separating the duties of safeguarding property from record-keeping of property
C) separating the duties of approving invoices from signing disbursement checks
D) separating the duties of cash disbursement from bank reconciliations
1) If a business knows that a liability exists but does not know the exact amount, the business is unable to
record the liability.
2) If a business knows that a liability exists but does not know the exact amount, the business must
estimate the amount of the liability and report it on the balance sheet.
3) Vacation pay is an example a liability that exists but the exact amount is not known.
4) Which of the following is NOT a liability that must be estimated?
A) warranties
B) vacation pay
C) bonus plans
D) promissory notes
5) Because a company usually does not know the amount of the year-end bonus at year-end, no liability is
recorded.
6) Alpine Enterprises estimates that it will pay a 5% bonus on annual net income after deducting the
bonus. The company reports net income of $500,000 before the calculation of the bonus. Employee Bonus
Expense will be debited for $25,000.
7) Since a company usually does not know the amount of the year-end bonus at year-end, the company
estimates the amount of the bonus based on a percentage.
8) Jamison Enterprises estimates that it will pay a 5% bonus on annual net income after deducting the
bonus. If Jamison reports net income of $480,000 before the calculation of the bonus, the amount of the
bonus is $24,000.
9) The employees of Vintage Clothes achieved all of the sales goals for 2017. Vintage decides to reward
the employees with a bonus of 20% on annual net income, after deducting the bonus. The net income
before the calculation of the bonus is $312,000. What is the amount of the bonus? (Round your final
answer to the nearest dollar.)
A) $62,400
B) $52,000
C) $55,059
D) $12,480
10) Martin, Inc. decided to reward its employees with a bonus of 7% on annual net income, after
deducting the bonus. The company reported net income of $513,600 before the calculation of the bonus.
Prepare the journal entry to accrue employee bonus expense. Omit explanation.
11) Vacation, health, and pension benefits must be estimated and recorded as a liability.
12) When an employee takes a paid vacation, the Vacation Benefits Payable account will be decreased
with a credit.
13) A pension plan is a plan that provides benefits to retired employees.