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Indicate whether the statement is true or false.
1. Qualified retirement plans are approved by an act of Congress.
a.
True
b.
False
2. A business is required by law to withhold certain payroll taxes from employee salaries.
a.
True
b.
False
3. Total earnings are sometimes referred to as net pay.
a.
True
b.
False
4. The investment income in a Roth IRA is not subject to federal income taxes when withdrawn.
a.
True
b.
False
5. When an employee’s earnings exceed the tax base, no more social security tax is deducted.
a.
True
b.
False
6. Social security tax is paid by both employees and employers.
a.
True
b.
False
7. The first task in preparing a payroll is to determine the number of days worked by each employee.
a.
True
b.
False
8. The amount of income tax withheld from each employee’s total earnings is determined solely from the number of
withholding allowances.
a.
True
b.
False
9. Payroll taxes withheld represent a liability for an employer until payment is made.
a.
True
b.
False
10. A single person will have more income tax withheld than a married employee.
a.
True
b.
False
11. The larger the number of withholding allowances claimed, the larger the amount of income tax withheld.
a.
True
b.
False
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12. Businesses use payroll records to inform employees of their annual earnings and to prepare payroll reports for the
government.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
13. Individual payroll checks are usually written on a(n)
a.
company’s regular checking account.
b.
separate payroll checking account.
c.
special purposes account.
d.
employee earnings account.
14. Employee regular earnings are calculated as
a.
regular hours times regular rate.
b.
total hours divided by regular rate.
c.
total hours plus overtime rate.
d.
overtime hours minus overtime rate.
15. Each employee name is listed in a payroll register along with
a.
employee number.
b.
marital status.
c.
withholding allowances.
d.
all of these.
16. The Accumulated Earnings column of the employee earnings record
a.
shows net pay for the year.
b.
is the total earnings since the first of the year.
c.
shows net pay for one quarter.
d.
is the gross earnings for one quarter.
17. Federal income tax is withheld from employee earnings
a.
only in those states electing to do so.
b.
in states without a state income tax.
c.
only in states where a state income tax is levied.
d.
in all 50 states.
18. The total earnings paid to an employee after payroll taxes and other deductions is recorded in the payroll register’s
a.
Gross Pay column.
b.
Total Earnings column.
c.
Net Pay column.
d.
Total Deductions column.
19. The amount on the employee earnings record used to determine if certain payroll taxes apply to an employee’s
earnings is
a.
net pay.
b.
accumulated earnings.
c.
gross earnings.
d.
social security taxes.
20. The withholding allowances of an employee affect
a.
social security tax withheld.
b.
federal income tax withheld.
c.
federal unemployment tax owed.
d.
state unemployment tax owed.
21. A business form used to record details affecting payments made to an employee is a(n)
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a.
employee earnings record.
b.
payroll journal.
c.
employee accounts payable record.
d.
tax withholding form.
Directions: Select the one term that best fits each definition. Print the letter identifying your choice on the line to the left
of the statement.
a.
401(k)
b.
commission
c.
direct deposit
d.
electronic funds transfer
e.
individual retirement account
f.
Medicare tax
g.
net pay
h.
qualified retirement plan
i.
Roth individual retirement account
j.
social security tax
k.
tax base
l.
withholding allowance
22. A qualified retirement plan that provides most individuals with a deferred federal income tax benefit.
23. The payment of an employee’s net pay using electronic funds transfer.
24. A method of paying an employee based on the amount of sales the employee generates.
25. A federal tax paid for old-age, survivors, and disability insurance.
26. A qualified retirement plan sponsored by an employer.
27. A deduction from total earnings for each person legally supported by a taxpayer, including the employee.
28. The maximum amount of gross earnings on which a tax is calculated.
29. A retirement plan that provides individuals with a tax benefit plan approved by the Internal Revenue Service.
30. A computerized cash payments system that transfers funds without the use of checks, currency, or other paper
documents.
31. The total earnings paid to an employee after payroll taxes and other deductions.
32. A qualified retirement plan that allows tax-free withdrawals from the account.
33. A federal tax paid for hospital insurance.
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