Accounting Chapter 10 3 Which of the following is an important aspect of control over payroll

Unlock access to all the studying documents.

View Full Document

40) Tom’s gross pay for the week is $800. Tom’s yearly pay is under the limit for OASDI. Assume that the rate for

state and federal unemployment compensation taxes is 6.2%, and that Tom’s pay year–to–date has not yet exceeded

the $7,000 cap. How much is the total amount of payroll taxes that Tom‘s employer must record as payroll tax

expenses?

A) $61.20

B) $38.80

C) $110.80

D) $49.60

41) Tom’s gross pay for the week is $800. Tom’s yearly pay is under the limit for OASDI. Assume that the rate for

state and federal unemployment compensation taxes is 6.2%, and that Tom’s pay year–to–date has previously

exceeded the $7,000 cap. How much is the total amount of payroll taxes that Tom’s employer must record as payroll

tax expenses?

A) $61.20

B) $38.80

C) $110.80

D) $49.60

1) The Statewide Sales Company has gross pay for March of $45,000. The first journal entry in the payroll cycle to

record salary expense would include a credit to Cash for $45,000.

2) Ensuring efficiency of the payroll process is one of the two key controls for payroll.

3) Art Parrish is the sole employee of Parrish Sales. His company pays a portion of his health insurance premium,

and also contributes to a retirement plan in his name. The company share of the health insurance premium is $400,

and the company contribution to the retirement plan is $550. The third journal entry in the payroll cycle to record

the employee benefits to be paid by the company should include a credit to Employee benefits payable for $950.

4) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is under

the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of 18%.

His year-to–date pay has already exceeded the $7,000 cap for FUTA and SUTA. The fifth journal entry in the

payroll cycle to record the payment by the company of the tax liability to the government includes a credit to Cash

for $1,332.

5) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is under

the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of 18%.

His year-to–date pay has already exceeded the $7,000 cap for FUTA and SUTA. The fifth journal entry in the

payroll cycle to record the payment by the company of payroll taxes to the government includes a debit to FICA

payable of $306.

6) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is under

the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of 18%.

His year-to–date pay has already exceeded the $7,000 cap for FUTA and SUTA. The fifth journal entry in the

payroll cycle to record the payment by the company of payroll taxes to the government includes a debit to FICA

payable of $612.

7) Parrish Sales withholds $720 from Art Parrish’s paycheck for federal income tax. This amount is part of the

company’s payroll tax expense.

8) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is under

the OASDI limit of $106,800, and thus subject to FICA. The total amount of FICA that the company pays to the

government on Art Parrish’s behalf is $612.

9) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is under

the OASDI limit of $106,800, and thus subject to FICA. The total amount of FICA that will be recorded as

company expense totals $612.

10) 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 tax payable

D) A credit to Salary payable to employees

11) Dan Jones and Pat Smith are the only two employees of Lone Star Company. In January, 2012, Dan’s gross pay

was $4,400 and Pat’s gross pay was $5,200. All earnings are subject to FICA taxes of 7.65%.

Which of the following would be included in the entry to record the salary expense for January?

A) A debit to Salary payable to employees for $734.40

B) A debit to FICA tax payable for $734.40

C) A credit to FICA tax payable for $734.40

D) A credit to Salary expense for $734.40

12) Dan Jones and Pat Smith are the only two employees of Lone Star Company. In January, 2012, Dan’s gross pay

was $4,400 and Pat’s gross pay was $5,200. All earnings are subject to FICA taxes of 8%.

Which of the following would be included in the entry to record the payroll tax expense to be paid out by Lone Star

Company for January?

A) A debit to FICA tax payable for $734.40

B) A credit to FICA tax payable for $734.40

C) A credit to Salary expense for $734.40

D) A debit to Salary payable to employees $734.40

13) The Statewide Sales Company has gross pay for March of $45,000. Which of the following is the first journal

entry in the payroll cycle to record salary expense?

Salary expense

45,000

Salary payable

45,000

Salary payable

45,000

Salary expense

45,000

Salary expense

45,000

Cash

45,000

Cash

45,000

Salary expense

45,000

14) The Statewide Sales Company has gross pay for March of $45,000. Which of the following would be included

in the first journal entry in the payroll cycle to record salary expense?

A) Credit Salary expense

B) Debit Cash

C) Debit Salary payable

D) Debit Salary expense

15) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of

18%. The second entry in the payroll cycle to record the disbursement of his net pay should include which of the

following?

A) Debit to Cash for $2,974

B) Credit to Cash for $2,974

C) Debit to Employee income tax payable of $720

D) Debit to FICA tax payable of $306

16) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of

18%. The second entry in the payroll cycle to record the disbursement of his net pay should include which of the

following?

A) Credit to Salary payable for $4,000

B) Debit to Cash for $2,974

C) Debit to Employee income tax payable of $720

D) Credit to FICA tax payable of $306

17) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of

18%. Art has a deduction of $320 for health insurance and $80 for United Way. The second entry in the payroll

cycle to record the disbursement of his net pay should include which of the following?

A) Credit to Salary payable

B) Credit to Payable to the United Way

C) Debit FICA tax payable

D) Debit Cash

18) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of

18%. Art has a deduction of $320 for health insurance and $80 for United Way. The second entry in the payroll

cycle to record the disbursement of his net pay should include which of the following?

A) Credit to Salary payable

B) Debit to Payable to the United Way

C) Debit FICA tax payable

D) Credit Cash

19) Art Parrish is the sole employee of Parrish Sales. His company pays a portion of his health insurance premium,

and also contributes to a retirement plan in his name. The company share of the health insurance premium is $400,

and the company contribution to the retirement plan is $550. The third journal entry in the payroll cycle to record

the employee benefits to be paid by the company should include which of the following?

A) Debit Employee benefits payable

B) Credit Health insurance expense

C) Credit Retirement plan expense

D) Credit Employee benefits payable

20) Art Parrish is the sole employee of Parrish Sales. His company pays a portion of his health insurance premium,

and also contributes to a retirement plan in his name. The company share of the health insurance premium is $400,

and the company contribution to the retirement plan is $550. The third journal entry in the payroll cycle to record

the employee benefits to be paid by the company should include which of the following?

A) Credit Cash

B) Debit Health insurance expense

C) Credit Retirement plan expense

D) Debit Employee benefits payable

21) Art Parrish is the sole employee of Parrish Sales. His company pays a portion of his health insurance premium,

and also contributes to a retirement plan in his name. The company share of the health insurance premium is $400,

and the company contribution to the retirement plan is $550. The third journal entry in the payroll cycle to record

the employee benefits to be paid by the company should include a credit to Cash for $950.

22) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. His year–to-date pay has already exceeded the

$7,000 cap for FUTA and SUTA. The fourth journal entry in the payroll cycle to record the employer’s payroll taxes

should include which of the following?

A) Credit to Payroll tax expense

B) Debit to FICA tax payable

C) Credit to FICA tax payable

D) Credit to Cash

23) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. His year–to-date pay has already exceeded the

$7,000 cap for FUTA and SUTA. The fourth journal entry in the payroll cycle to record the employer‘s payroll

taxes should include which of the following?

A) Debit to Payroll tax expense

B) Debit to FICA tax payable

C) Credit to Payroll tax expense

D) Credit to Cash

24) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of

18%. His year–to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. The fifth journal entry in the

payroll cycle to record the payment by the company of payroll taxes to the government includes which of the

following?

A) Credit to Cash

B) Credit to Employee income tax payable

C) Credit to FICA tax payable

D) Debit to Salary payable

25) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of

18%. His year–to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. The fifth journal entry in the

payroll cycle to record the payment by the company of payroll taxes to the government includes which of the

following?

A) Credit to Salary payable

B) Credit to Employee income tax payable

C) Debit to FICA tax payable

D) Debit to Salary payable

26) 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

27) Which of the following is a reason that many companies maintain two payroll bank accounts?

A) To avoid writing a paycheck to a fictitious person

B) To prove an employee’s hours worked

C) To separate the duties of human resources personnel and accounting personnel

D) To make bank reconciliations simpler

28) Which of the following is a reason that 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

29) Good internal controls over payroll would include all of the following EXCEPT that:

A) accounting for payroll should be separate from hiring and firing of employees.

B) disbursement of paychecks should be separate from the function of maintaining payroll records.

C) employees should clock in and out to insure accuracy of work hours.

D) cash receipts from customers should be separated from the accounting for accounts receivable.

30) Which of the following is a major control risk in the payroll area?

A) Theft of inventory by staff

B) Fictitious persons cashing paychecks

C) Expenses being recorded as assets in order to manipulate earnings

D) Contracts being awarded to relatives of employees

31) Which of the following is a control procedure to prevent fictitious persons cashing paychecks?

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

32) 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

33) The Statewide Sales Company has gross pay for March of $45,000. Please provide the first journal entry in the

payroll cycle to record salary expense.

Salary expense

34) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of

18%. Please provide the second entry in the payroll cycle to record the disbursement of his net pay.

Salary payable

35) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of

18%. Art has a deduction of $320 for health insurance and $80 for United Way. Please provide the second entry in

the payroll cycle to record the disbursement of his net pay.

Salary payable

36) Art Parrish is the sole employee of Parrish Sales. His company pays a portion of his health insurance premium,

and also contributes to a retirement plan in his name. The company share of the health insurance premium is $400,

and the company contribution to the retirement plan is $550. Please provide the third journal entry in the payroll

cycle to record the employee benefits paid by the company.

Health insurance expense

Retirement plan expense

37) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. His year–to-date pay has already exceeded the

$7,000 cap for FUTA and SUTA. Please provide the fourth journal entry in the payroll cycle to record the

employer’s payroll taxes.

Payroll tax expense

38) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is

under the OASDI limit of $106,800, and thus subject to FICA. He is also subject to federal income tax at a rate of

18%. His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. Please provide the fifth

journal entry in the payroll cycle to record the payment by the company of payroll taxes to the government.

Employee income tax payable

FICA tax payable