College Accounting, 14e (Slater)
Chapter 8 Paying, Recording, and Reporting Payroll and Payroll Taxes:
The Conclusion of the Payroll Process
8.1 Learning Objective 8-1
1) What type of an account is Wages and Salaries Payable?
A) Asset
B) Liability
C) Contra-liability
D) Expense
2) A monthly depositor:
A) is an employer who only has to deposit Form 941 taxes on the 15th day of the month (or next banking
day).
B) is determined by the amount of Form 941 taxes that they paid in the look–back-period.
C) will remain a monthly depositor, once classified, for one year at which time they will be reevaluated.
D) All of the above answers are correct.
3) The Wages and Salaries Expense account would be used to record:
A) net earnings for the office workers.
B) the amount for payroll tax.
C) gross earnings for the office workers.
D) a debit for the amount of net pay owed to the office workers.
4) Wages and Salaries Payable would be used to record:
A) gross earnings of the employees paid.
B) net earnings of the employees not paid.
C) straight-time pay only.
D) the paid portion of the earnings.
5) Cash — Payroll Checking is a(n):
A) contra-asset.
B) liability.
C) asset.
D) expense.
6) What type of account is Payroll Tax Expense?
A) Asset
B) Pre-paid liability
C) Contra-revenue
D) Expense
7) The information needed to make the journal entries to record the wages and salaries expense comes
from:
A) form W-2.
B) form W-4.
C) the payroll register.
D) form 941.
8) The account for Payroll Tax Expense includes all of the following except:
A) federal unemployment taxes.
B) FICA taxes (OASDI and Medicare) paid by the employer for the latest payroll period.
C) state unemployment taxes.
D) federal income tax.
9) The debit amount to Payroll Tax Expense represents:
A) the employer’s portion of the payroll taxes.
B) the employees’ portion of the payroll taxes.
C) the employer’s and employees’ portion of the payroll taxes.
D) None of the above is correct.
10) What is debited if State Unemployment Tax Payable (SUTA) is credited?
A) Payroll Tax Expense
B) SUTA Tax Payable
C) Pre-paid Payroll Taxes
D) Salaries Expense
11) The entry to record the payroll tax expense would include:
A) a credit to Federal Income Taxes Payable.
B) a debit to Pre-paid Tax Expense.
C) a credit to FICA (OASDI and Medicare) Taxes Payable.
D) a credit to Wages Payable.
12) The entry to record employer’s total FICA, SUTA, and FUTA tax would include:
A) a debit to Payroll Tax Expense.
B) a credit to Payroll Tax Expense.
C) a credit to Accounts Payable.
D) a debit to Payroll Tax Payable.
13) Which of the following statements is false?
A) Payroll Tax Expense is an expense account.
B) FICA-OASDI Payable increases on the credit side of the account.
C) Payroll Tax Expense increases on the debit side of the account.
D) FUTA Tax Payable increases on the debit side of the account.
14) Why would a company use a separate payroll cash account?
A) Provides for better internal control
B) Ease of account reconciliation
C) Determine whether or not the employee has cashed their check
D) All of the above are correct.
15) Which of the following statements is true?
A) Payroll Tax Expense increases on the debit side of the account.
B) FICA-OASDI Payable is a Liability.
C) Payroll Tax Expense has a debit normal balance.
D) All of these answers are correct.
16) Gail’s Bakery had the following information before the pay period ending June 30:
Employee
Name Pay
rate Hours
worked Cumulative
earnings Department Federal
income tax
withheld
P. Guerrero $3,000 Salaried $12,000 Kitchen $91
T. Bennitt 10/hr 51 6,500 Office 23
Assume:
Each hourly employee is paid 1½ times pay rate for time worked in excess of 40 hours.
FICA-OASDI applied to the first $128,400 at a rate of 6.2%.
FICA-Medicare applied at a rate of 1.45%.
FUTA applied to the first $7,000 at a rate of 0.8%.
SUTA applied to the first $7,000 at a rate of 5.6%.
State income tax is 3.8%.
Given the above information, what would be the amount applied to Office Employee Wage Expense?
A) Debit $565
B) Credit $565
C) Debit $510
D) Credit $510
17) Grammy’s Bakery had the following information before the pay period ending June 30:
Employee
Name Pay
rate Hours
worked Cumulative
earnings Department Federal
income tax
withheld
P. Ganster $3,000 Salaried $12,400 Kitchen $86.00
T. Barnes 12/hr 50 6,700 Office 22.00
Assume:
Each hourly employee is paid 1-1/2 times pay rate for time worked in excess of 40 hours.
FICA-OASDI applied to the first $128,400 at a rate of 6.2%.
FICA-Medicare applied at a rate of 1.45%.
FUTA applied to the first $7,000 at a rate of 0.8%.
SUTA applied to the first $7,000 at a rate of 5.6%.
State income tax is 3.8%.
Given the above information, what would be the amount applied to Kitchen Salaries Expense?
A) Debit $12,400
B) Credit $12,400
C) Debit $3,000
D) Credit $3,000
18) When a business starts, what must it obtain that identifies itself to the government?
A) State Employment Number
B) Federal Unemployment Number
C) Employer Identification Number
D) A look-back period
19) The look-back period is used to determine whether:
A) a business should make its Form 941 tax deposits on a monthly or semiweekly basis.
B) an employer will use Form 940.
C) an employer has sent the W-2s to their employees on timely basis.
D) an employer must pay back taxes.
20) Form SS-4 is:
A) completed to obtain an EIN.
B) submitted to summarize the W-2 forms to the Social Security Administration.
C) submitted quarterly to pay FIT and FICA taxes.
D) submitted annually to pay unemployment taxes.
21) Jefferson Tutoring had the following payroll information on February 28:
Employee Gross Pay Cumulative Earnings
Prior to this Payroll
R. Booker $4,700 $4,500
Assume:
FICA tax rates are: OASDI 6.2% on a limit of $128,400 and Medicare 1.45%.
State Unemployment tax rate is 2% on the first $7,000.
Federal Unemployment tax rate is 0.8% on the first $7,000.
Using the information above, the journal entry to record the payroll tax expense for Jefferson Tutoring
would include:
A) a debit to Payroll Tax Expense in the amount of $429.55.
B) a credit to FUTA Payable for $20.00.
C) a credit to SUTA Payable for $50.00.
D) All of the above are correct.
22) A company must pay Form 941 taxes electronically if:
A) they do business in multiple states.
B) they pay more than $2,500 in a given quarter.
C) they pay less than $2,500 in a given quarter.
D) The company would never have to pay electronically.
23) Mid-West Tutoring had the following payroll information on January 31:
Employee Gross Pay Cumulative Earnings
Prior to this Payroll
R. Tanner $4,300 $4,600
Assume:
FICA tax rates are: OASDI 6.2% on a limit of $128,400 and Medicare 1.45%.
State Unemployment tax rate is 2% on the first $7,000.
Federal Unemployment tax rate is 0.8% on the first $7,000.
Federal Income Tax Withheld $900; State Income Tax Withheld $300.
Using the information above, the journal entry to record the employee’s payroll expense would include:
A) a debit to Payroll Tax Expense in the amount of $4,300.
B) a debit to Wages and Salaries Expense in the amount of $4,300.
C) a credit to Cash in the amount of $4,300.
D) a credit to FUTA Payable for $120.
24) Wages and Salaries Expense is:
A) equal to net pay.
B) equal to gross pay.
C) equal to the employer’s taxes.
D) equal to wages and salaries paid in cash.
25) An employer must always use a calendar year for payroll purposes.
26) The balance in the Wages and Salaries Expense account is equal to the amount of cash paid to the
employees.
27) The payroll tax expense is recorded quarterly only.
28) There is no limit on the amount of taxes paid for SUTA.
29) A banking day is any day that the bank is open to the public for business.
30) FIT Payable has a credit normal balance.
31) FICA taxes are levied only on employees.
32) Using the information below, determine the amount of the payroll tax expense for B. Hope
Company’s first payroll of the year. In your answer list the amounts for FICA (OASDI and Medicare),
SUTA, and FUTA.
Employee Taxable Earnings
K. Jackson $800
K. James 520
T. Smith 400
Assume:
FICA tax rates are: OASDI 6.2% on a limit of $128,400 and Medicare 1.45%.
State Unemployment tax rate is 5.0% on the first $7,000.
Federal Unemployment tax rate is 0.8% on the first $7,000.
33) Using the information provided below, prepare a journal entry to record the payroll tax expense for
Mr. B’s Carpentry.
Employee Gross Pay Cumulative Earnings
Prior to this Payroll
V. Vaughn $1,600 $44,000
C. Jefferson 1,200 7,000
B. Hogan 1,400 120,000
Assume:
FICA tax rates are: OASDI 6.2% on a limit of $128,400 and Medicare 1.45%.
State unemployment tax rate is 2% on the first $7,000.
Federal unemployment tax rate is 0.8% on the first $7,000.
34) Sweeney’s Recording Studio payroll records show the following information:
Cumulative Earnings Weekly
Before Payroll Salary
D. Gordon $20,000 1,100
Assume the following:
a) FICA: OASDI, 6.2% on a limit of $128,400; Medicare, 1.45%.
b) Each employee contributes $40 per week for union dues.
c) State income tax is 5% of gross pay.
d) Federal income tax is 20% of gross pay.
Prepare a general journal payroll entry: for the payment of the above weekly salary only.
35) Prepare a general journal payroll entry for Advanced Computer Programming using the following
information:
Cumulative Earnings Weekly
Before Payroll Salary Department
C. Lester $60,000 $1,000 Office
C. Oros 90,000 1,600 Sales
J. Carnarvon 165,000 2,100 Office
Assume the following:
a) FICA: OASDI, 6.2% on a limit of $128,400; Medicare, 1.45%.
b) Federal income tax is 15% of gross pay.
c) Each employee pays $20 per week for medical insurance.
36) Payroll information for Kinzer’s Interior Decorating for the first week in October is as follows:
Employees’ gross wages $70,000
Taxable earnings for FICA–
OASDI 50,000
Medicare 70,000
Taxable earnings subject to Federal and State Unemployment taxes: $5,000
Assume the following tax rates:
FICA: OASDI 6.2%
FICA: Medicare 1.45%
Federal unemployment 0.8%
State unemployment 2.0%
Required: Prepare the employer’s payroll tax entry for Kinzer for the first week of October.
37) Mike’s Door Service’s payroll data for the second week of June included the following:
Employees’ gross earnings $4,500
Taxable earnings for FICA:
OASDI 2,500
Medicare 4,500
Taxable earnings for state unemployment taxes: $2,000
Assume the following tax rates:
FICA-OASDI 6.2%
FICA-Medicare 1.45%
State unemployment 1.5%
Federal unemployment 0.06%
Required: Prepare the payroll tax expense entry for Mike’s for the second week of June.
38) Record in the general journal the payroll tax entry for the week ended August 31. Use the following
information gathered to make the entry.
Cumulative Earnings Gross Pay
Employee Before Weekly Payroll For Week
C. Legal $20,000 $2,000
D. Morgan 14,000 800
T. Delcotto 5,000 600
a) FICA tax rate is: OASDI 6.2% on a limit of $106,800, and Medicare is 1.45%
b) Federal Unemployment is 0.8% on a limit of $7,000
c) State Unemployment is 2% on a limit of $7,000
8.2 Learning Objective 8-2
1) What liability account is reduced when the employees are paid?
A) Payroll Taxes Payable
B) Federal Income Taxes Payable
C) Wages and Salaries Payable
D) Wages and Salaries Expense
2) If Wages and Salaries Payable is debited, what account would most likely be credited?
A) Cash
B) Pre-Paid Payroll Expense
C) Payroll Expense
D) SUTA Payable
3) Which taxes are considered 941 taxes?
A) FICA, FUTA, and SUTA
B) FICA and SIT
C) FICA, FIT, and Workers’ Compensation
D) None of these answers is correct.
4) Form 941 is filed:
A) monthly.
B) annually.
C) weekly.
D) quarterly.
5) A calendar quarter is made up of:
A) 4 months.
B) 13 weeks.
C) 5 weeks.
D) however many weeks are needed to complete the month.
6) Which form is used to report FICA taxes for the employer and employee, and also federal income taxes
for the employee?
A) Form 941
B) Form 944
C) Form 940
D) Form W-2
7) The payment of FUTA would include:
A) a debit to FUTA Payable.
B) a credit to FUTA Payable.
C) a debit to cash.
D) a credit to FUTA Expense.
8) The entry to record the payment of taxes withheld from employees and FICA taxes would be to:
A) credit Cash; debit FICA-OASDI Payable, FICA-Medicare Payable, and Federal Income Tax Payable.
B) debit Cash; credit FICA-OASDI Payable, FICA-Medicare Payable, and Federal Income Tax Payable.
C) credit Cash; credit FICA-OASDI Payable, FICA–Medicare Payable, and Federal Income Tax Payable.
D) None of these answers is correct.