Chapter 15—Personal Taxes, Payroll, and Financial Statements
TRUE/FALSE
1. Because taxes affect you, the employee, as they show up in the form of deductions on your
paychecks, it is important to learn as much as possible about them.
2. State taxes are established and enforced by federal law so that each individual citizen pays
what he or she properly owes to support the functions financed by the federal government.
3. If an employee does not earn enough money to pay taxes, he or she must file an income tax
return to get the money back that was withheld by his or her employer for taxes.
4. Under the terms of the Social Security Act, the employer is required by law to deduct a
certain percentage of the employee’s wages each payday and remit the amount deducted to
the state government.
5. Your state income tax is not taxable if the money was earned in another state.
6. There are situations in the food service industry where an employee is paid a salary plus a
commission.
7. Amount of sales ÷ Percent of commission = Amount of commission.
8. The profit and loss statement is a summary or report of the business operation for a given
period of time.
9. Sales – Cost of food sold = Gross margin.
10. A budget can be made up whenever the food service operator wants to know the business’s
financial situation or feels it necessary to review the financial situation.
11. The gross margin or gross profit is found by subtracting the cost of food sold from the total
sales.
12. Depreciation is the act of replacing an item as it wears out.
13. Percentage of cost of food sold plus percentage of gross margin will equal 100%.
14. Assets – Liabilities = Proprietorship.
15. Accounts payable refers to money that is owed to the company by various people or
companies for various reasons.
16. Variable cost is the changeable cost or expenses that will increase or decrease with the level
of sales volume.
17. Occupational expenses, also called the cost of ownership, are those that continue whether or
not the restaurant is operating.
18. The contribution rate percentage is calculated by multiplying the contribution rate by the
sales.
19. The formula to determine the break-even point is to take the fixed costs and divide them by
the contribution rate percentage.
20. In a budget, the areas listed under the two major components, income and assets, will vary,
depending on the size of the overall operation.
MULTIPLE CHOICE
1. Which of the following is not considered a federal tax?
a.
Personal Property Tax
b.
Employee’s Withholding Tax
c.
Income Tax
d.
Social Security
2. Which of the following is not considered a local tax?
a.
Employee’s Withholding Tax
b.
Real Estate Tax
c.
FICA
d.
Personal Property Tax
3. Which of the following is considered a state tax?
a.
Personal Property Tax
b.
Various Licenses
c.
Real Estate Tax
d.
Occupational Tax
4. _____ is money withheld from each employee’s paycheck during the year to pay for the
income tax that he or she owes the federal government at the end of the year.
a.
Employee’s Withholding Tax
b.
Personal Property Tax
c.
Income Tax
d.
Social Security
5. The letters FICA stand for the _____, which became law in 1935.
a.
Federal Insurance Contributions Act
b.
Federal Indemnity Contributions Act
c.
Federal Insurance Charity Act
d.
Fixed Insurance Contributions Act
6. _____ are the amount of money you earn before any deductions (the amount taken away)
are made.
a.
Net wages
b.
Gross wages
c.
Social Security taxes
d.
Employee’s withholding taxes
7. There are two major _____ that must be prepared and are essential to the operation of a
business: the profit and loss (income) statement, sometimes referred to as the P&L sheet,
and the balance sheet.
a.
financial statements
b.
tax forms
c.
charge accounts
d.
budgets
8. The _____ is a summary or report of the business operation for a given period of time.
a.
budget
b.
income statement
c.
FICA
d.
profit and loss statement
9. The balance sheet is a necessary part of any business operation, almost as important as the
profit and loss statement. It is a statement listing all the following except:
a.
auto loan
b.
supplies
c.
depreciation
d.
kitchen equipment
10. _____ is extremely important to any business operation when financial planning decisions
must be made.
a.
The cost of food sold
b.
Planning profits
c.
Paying taxes
d.
Advertising
11. _____ is the changeable cost or expenses that will increase or decrease with the level of
sales volume.
a.
Variable cost
b.
A property tax
c.
The inventory
d.
Fixed cost
12. Which of the following is an example of a primary expense?
a.
overtime wages
b.
FICA
c.
telephone service
d.
charge accounts
13. The _____ is the amount of money that is left after the variable costs are subtracted from the
sales.
a.
total variable profit
b.
contribution rate
c.
gross profit
d.
total sale
14. Which of the following is not an example of an expenditure?
a.
rent
b.
fringe benefits
c.
workmen’s compensation
d.
labor cost
NUMERIC RESPONSE
Calculate the following problems concerning Social Security tax. Round answers to the
nearest cent.
1. The cook at the Sea Shore Restaurant is paid a salary of per week, plus
commission on all food sales for the week in excess of $10,000. During the second week of
March, the food sales amounted to . If the Social Security tax rate is , how
much Social Security tax was deducted from his earnings for that week?
$_______________
2. A waiter at the Golden Gate Restaurant is paid a salary of $383 per week, plus tips. During
the first week of July his tips amounted to $328. Assuming that the Social Security tax rate
is 7.30%, how much FICA tax was deducted from his earnings for that week?
$_______________
3. A hostess at the Red Lion Restaurant is paid a salary of per week, plus tips. During
the first week of May her tips amounted to . Assuming that the Social Security tax rate
is , how much tax was deducted from her earnings for that week?
$_______________
4. The manager of the Kentucky Inn is paid a salary of per week, plus
commission on the food and beverage business in excess of $12,500 per week. During the
second week of November, the business amounted to . Assuming that the Social
Security tax rate is , how much tax was deducted from his earnings for that week?
$_______________
5. The catering manager of the Gourmet Catering Company works on a
25
8
% commission of
total sales for each week. During the first week in June total sales were $19,800. How much
Social Security tax did she pay if the rate is 7.30%?
$_______________
6. The chef at the Metropolis Hotel is paid a salary of per month and receives a
paycheck twice a month. On a recent paycheck, the deductions from his total earnings were
as follows: FICA tax, federal withholding tax, state income tax,
and city income tax. What was his net pay?
$_______________
7. A waiter at the Sands Hotel receives a base salary of per week, plus tips. Last
week, his tips amounted to . From his gross wages the following deductions were
made: FICA tax , federal withholding tax , state income tax , and
for health insurance. What was his net pay?
$_______________
8. A baker at the Chesapeake Hotel works on a 40-hour-per week basis, with time and a half
for all overtime. During this past week, she worked 49 hours. Her regular pay rate is
per hour. The following deductions were taken from her gross pay: federal withholding tax
15%, 7.30% FICA, health insurance , and union dues . What was her net pay?
$_______________
9. The catering manager at Elegant Fare Catering Company receives a basic salary of $1,070
per month, plus a 2% commission on all the catered business. Last month, the catered
business amounted to $31,700. What was her gross wage?
$_______________
10. The manager of a local fast-food restaurant receives a monthly salary of , plus a
commission of for every sandwich sold during the month. Last month,
sandwiches were sold. What was his gross wage for the month?
$_______________
11. The manager of the food concession at the local swimming club receives a small weekly
salary of $130, plus a commission of 5.5% on all food sales for the week. Last week, the
food sales amounted to $4,877. What was her gross wage for the week?
$_______________
12. The preparation cook at The Home Kitchen Catering Company receives a salary of $437 per
week, plus a commission of 1.4% on all the catered party business. In a recent week, the
catered party business amounted to $14,400. Deducted from her gross wages were the
following: FICA tax $65.55, federal withholding tax $131.10, and city income tax $13.11.
What was her net pay?
$_______________
13. The food and beverage manager at the Four Square Hotel receives a salary of per
month, plus a commission of on all food and beverage business for the month. Last
month, the food business amounted to . The beverage business was . What
was her gross wage for the month?
$_______________
COMPLETION
1. ____________________ ____________________ are taxes collected by the federal
government.
2. The ____________________ ____________________ ____________________ is money
withheld from each employee’s paycheck during the year to pay for the income tax that he
or she owes the federal government at the end of the year.
3. The main source of income for operating the federal government is obtained from
____________________ ____________________, levied on the income of individuals and
corporations.
4. ____________________ stands for the Federal Insurance Contributions Act, which became
law in 1935 and established the Social Security system and tax.
5. The term ____________________ means “that which is paid or received for services” and
includes salaries, commissions, fees, bonuses, tips, and so forth.
6. ____________________ ____________________ are collected for the purpose of operating
all the state functions and agencies.
7. ____________________ ____________________ tax is money withheld from each
employee’s paycheck by the employer during the year for the purpose of paying the
employee’s state income tax at the end of the calendar year.
8. ____________________ ____________________ is the amount of money one earns before
any deductions are made.
9. After paycheck deductions are made, the resulting pay is called ____________________
pay.
10. A ____________________ is generally a percentage of sales for a given period.
11. A(n) ____________________ ____________________ is the instrument used in a business
operation to let management know its exact financial position.
12. The ____________________ ____________________ ____________________
____________________ is a summary or report of the business operation for a given period
of time.
13. The ____________________ ____________________ contains a record of all income and
expenses.
14. The ____________________ ____________________ or gross profit is found by
subtracting the cost of food sold from the total sales.
15. ____________________ ____________________ taxes are paid to the federal government
for the purpose of retirement benefits.
16. ____________________ is the act of lessening the value of an item as it wears out.
17. ____________________ ____________________ ____________________ are the sum of
all the expenses incurred during the period or month that the P&L statement covered.
18. ____________________ ____________________ is found by subtracting total operating
expenses from gross margin.
19. The ____________________ ____________________ is a statement listing all the
company’s assets and liabilities to determine net worth, proprietorship, or capital.
20. A ____________________ ____________________ is defined as the time between one
yearly settlement of financial accounts and another.
21. ____________________ ____________________ refers to money that is owed to the
company by various people or companies for various reasons.
22. ____________________ ____________________ refers to money the food service
operation owes for purchases made.
23. ____________________ ____________________ ____________________ is a
mathematical method for finding the dollar amount needed for a food service operation to
break even.
24. ____________________ ____________________ ____________________ calculates the
level of economic activity where the operation neither makes a profit nor incurs a loss.
25. Each food service operator must know how to determine the amount of sales dollars needed
to show a profit or a loss. This is referred to as the ____________________
____________________ ____________________.
26. ____________________ ____________________ is the money received from the sale of all
products, food, beverages, and so forth.
27. ____________________ cost is the changeable cost or expenses that will increase or
decrease with the level of sales volume.
28. ____________________ expenses are additional expenses incurred as a result of serving
customers.
29. ____________________ ____________________ is the sales revenue minus variable costs.
30. ____________________ expenses, also called the cost of ownership, are those that continue
whether or not the restaurant is operating.
31. ____________________ expenses are expenses such as utilities, basic staff (preparation,
service, etc.), telephone service, repairs and maintenance, licenses, and exterminating costs.
32. Examples of ____________________ expenses are replacement costs for china, laundry,
paper supplies, and payroll or labor costs.
33. Adding together the cost of goods sold and the serving expenses results in the
____________________ cost.
34. Total variable profit is calculated by subtracting the variable cost from
____________________ ____________________.
35. ____________________ ____________________ is the expense that remains constant,
regardless of the amount of goods that are sold.
36. The ____________________ ____________________ is the amount of money that is left
after the variable costs are subtracted from the sales.
37. The contribution rate percentage is calculated by dividing the contribution rate by the
____________________.
38. ____________________ is a plan for adjusting expenditures to probable income for a
calendar or fiscal year.
39. In a budget, the areas listed under the two major components, ____________________ and
expenditures, will vary, depending on the size of the overall operation.
MATCHING
Match the following chapter terms with their definition.
a.
e.
b.
f.
c.
g.
d.
h.
1. Monetary value of food on hand at beginning of the month, plus the purchases for the
month, minus the monetary value of food in the final inventory
2. Excess value of resources over liabilities; also called net assets
3. Amount of money or property that a person or company uses in carrying on a business
4. A regular, periodical payment for official or professional services rendered
5. Lessening or lowering in value
6. Time beyond the regular hours
7. A written statement made to show the true financial condition for a person or business by
exhibiting assets, liabilities or debts, profit and loss, and net worth
8. Money paid to an employee for services before deductions
Match the following chapter terms with their definition.
a.
e.
b.
f.
c.
g.
d.
h.
9. Money collected on purchases of goods from consumers or businesses by state governments
10. A plan of systematic spending; to plan one’s expenditures of money, time, and so forth
11. Issued by a bank to a depositor indicating that a specific amount of money is set aside and
not subject to withdrawal except on surrender of the certificate, usually with an interest
penalty
12. Costs that are changeable
13. Money coming in from the sale of certain items
14. That which is spent
15. A mathematical method used to find the dollar amount needed for a food service operation
to break even
16. Monetary value of goods on hand at beginning of the month, plus the purchases for the
month, minus the monetary value of food in the final inventory
Match the following chapter terms with their definition.
a.
e.
b.
f.
c.
g.
d.
h.
17. The act that established the Social Security system and tax
18. Sales less the cost of food; the margin before other deductions are taken
19. A deduction from a person’s paycheck for the purpose of paying yearly income taxes
20. The process of taking away
21. Instruments used in a business operation to let management know its exact financial position
22. That which is paid or received for services
23. Pay based on the amount of business done
24. Money paid to an employee for services after deductions
Match the following chapter terms with their definition.
a.
e.
b.
f.
c.
g.
d.
h.
25. Those costs (price paid) that stay firm and will not change
26. The total value of all goods on hand
27. The time between one yearly settlement of financial accounts and another
28. The simplest method to use when figuring depreciation on an item, such as a piece of
equipment
29. All payments received for services provided
30. A state of being under obligation; responsible for a loss, debt, penalty, or the like
31. Things of value; all the property of a person, company, or estate that may be used to pay
debts
32. Ownership
SHORT ANSWER
1. Find the break-even point, and tell whether the business is making a profit or a loss.
Jim’s tavern did $75,000 in sales. Their variable cost was 40% of the total sales, and the
fixed costs were $22,000.
2. Find the break-even point, and tell whether the business is making a profit or a loss.
Bob’s diner did $125,000 in sales. Their variable cost was 65% of the total sales, and the
fixed costs were $50,000.