69) An employee earns $16 per hour. He worked 45 hours the last week of January (assuming time and a
half for overtime).
Calculate the total amount of employee deductions.
The business is involved in interstate commerce.
Federal Income Tax rate = 20%
State Income Tax rate = 5%
FICA rate OASDI = 6.2% and Medicare = 1.45%
FUTA rate = .8%
SUTA rate = 5.6%
$ ________
7.2 Learning Objective 7-2
1) An employee has gross earnings of $1,000 with withholdings of 6.2% FICA–OASDI, 1.45 % FICA-
Medicare, $50 for federal income tax and $10 for state income tax. How much is the gross pay?
A) $1000.00
B) $781.15
C) $771.15
D) $791.15
2) An employee has gross earnings of $1,000 with withholdings of 6.2% FICA-OASDI, 1.45% FICA-
Medicare, $50 for federal income tax and $10 for state income tax. How much is the net pay?
A) $900.00
B) $781.15
C) $863.50
D) $791.15
3) Ocean’s Auction House’s payroll for April includes the following data:
Gross earnings
$2,900
Salaries subject to FICA:
6.2% OASDI
2,550
1.45% Medicare
3,000
Salaries subject to unemployment:
0.8% FUTA
2,000
2.0% SUTA
2,000
Other deductions include:
Federal income tax
500
State income tax
300
What is the gross pay?
A) $1,998.40
B) $1,942.40
C) $2,900.00
D) $2,798.40
4) Ocean’s Auction House’s payroll for April includes the following data:
Gross earnings
$3,000
Salaries subject to FICA:
6.2% OASDI
2,550
1.45% Medicare
3,000
Salaries subject to unemployment:
0.8% FUTA
2,000
2.0% SUTA
2,000
Other deductions include:
Federal income tax
500
State income tax
300
What is the net pay?
A) $1,998.40
B) $1,942.40
C) $3,000.00
D) $2,798.40
5) Ocean’s Auction House’s payroll for April includes the following data:
Gross earnings
$4,000
Salaries subject to FICA:
6.2% OASDI
2,550
1.45% Medicare
4,000
Salaries subject to unemployment:
0.8% FUTA
2,000
2.0% SUTA
2,000
Other deductions include:
Federal income tax
500
State income tax
300
What is the employer’s portion of the tax?
A) $1,072.10
B) $56.00
C) $272.10
D) $800.00
6) Ocean’s Auction House’s payroll for April includes the following data:
Gross earnings
$3,000
Salaries subject to FICA:
6.2% OASDI
2,550
1.45% Medicare
3,000
Salaries subject to unemployment:
0.8% FUTA
2,000
2.0% SUTA
2,000
Other deductions include:
Federal income tax
500
State income tax
300
What is the employee’s portion of the tax?
A) $1,057.60
B) $1,001.60
C) $257.60
D) $800.00
7) The payroll taxes the employer is responsible for are:
A) FICA-OASDI.
B) FICA-Medicare.
C) worker’s compensation.
D) All of the above are correct.
8) If the employee has $300 withheld from their check for FICA–OASDI, what is the amount that the
employer would need to pay?
A) $300
B) $100
C) $0
D) $400
9) If the employee has $500 withheld from their check for federal income tax, what is the amount that the
employer would need to pay for their portion of the federal income tax?
A) $500
B) $100
C) $0
D) $400
10) Unemployment taxes are:
A) based on wages paid to employees.
B) based employer’s payment history.
C) the same for all employers.
D) Both A and B are correct.
11) Workers’ compensation:
A) insures employees against losses they may incur due to injury or death while on the job.
B) is based on the total estimated payroll.
C) is paid for by the employer.
D) All of the above are correct.
12) Most employers are levied a payroll tax for:
A) state and federal income taxes.
B) only FICA taxes.
C) FICA taxes, federal and state employment unemployment taxes.
D) only state and federal unemployment taxes.
13) Daryn’s cumulative earnings before this pay period were $5,450, and gross for the week is $700.
Assuming the wage base limit is $7,000, how much of this week’s pay is subject to taxes for SUTA and
FUTA?
A) $700
B) $0
C) $1,550
D) $550
14) Kristin’s cumulative earnings before this pay period were $7,200 and gross pay for the week is $900.
Assuming the wage base limit is $7,000, how much of this week’s pay is subject to taxes for FUTA and
SUTA?
A) $900
B) $200
C) $0
D) $500
15) FICA (OASDI and Medicare) and unemployment taxes are similar in that they:
A) are paid by the employee.
B) have the same maximum taxable wage base.
C) are a specified percent of federal income tax withholdings.
D) are payroll tax expenses of the employer.
16) For which of the following taxes is there a ceiling on the amount of employee annual earnings subject
to the tax?
A) Federal unemployment taxes
B) State unemployment taxes
C) FICA-OASDI
D) All of these answers are correct.
17) Blue’s Tax Service has two types of employees, management and clerical support. The company
estimates that it will pay the clerical support $300,000 next year and the managers $255,000. For every
$100, the company pays $0.14 into the workers‘ compensation insurance. Calculate the amount of
worker’s compensation insurance.
A) $777
B) $336
C) $441
D) None of the above are correct.
18) Both employees and employers pay which of the following taxes?
A) FICA taxes (OASDI and Medicare)
B) FUTA tax
C) Federal income tax
D) Worker’s Compensation
19) An employee has gross earnings of $1000 and withholdings of $60 FICA (OASDI and Medicare), and
$50 for income taxes (FIT and SIT). The employer pays $60 FICA (OASDI and Medicare), $10 for SUTA,
and $5.60 FUTA. What is the employer‘s total cost of the employee?
A) $915.60
B) $1,085.60
C) $975.60
D) $1,035.60
20) Clare’s earnings during the month of February were $6,200. Her earnings for the year prior to
February were $5,600. Clare’s employer is subject to federal unemployment taxes of 0.8% and state
unemployment taxes of 5.4% on the first $7,000. The employer’s unemployment payroll tax expense for
Clare in the month of February is:
A) $4.96.
B) $49.60.
C) $496.00.
D) $0.49.
21) Kate’s earnings during the month of May were $1,200. Her earnings for the year prior to May were
$12,300. Jake’s employer is subject to state unemployment of 2.0% and federal unemployment taxes of
0.8% on the first $7,000. The employer’s unemployment payroll tax expense for May is:
A) $10.40.
B) $26.00.
C) $0.
D) $36.40.
22) Sue’s jewelry Shoppe‘s July payroll includes the following data:
Gross salaries
$12,000
Salaries subject to FICA:
6.2% Social Security
12,000
1.45% Medicare
12,000
Salaries subject to:
FUTA 0.8%
6,000
SUTA 2.7%
6,000
The employer’s payroll tax for the period would be:
A) $918.
B) $1,128.
C) $210.
D) $1,000.
23) Ocean’s Auction House’s payroll for April includes the following data:
Gross salaries
$20,000
Salaries subject to FICA:
6.2% Social Security
17,500
1.45% Medicare
20,000
Salaries subject to:
0.8% FUTA
1,000
2.0% SUTA
1,000
The employer’s payroll tax for the period would be:
A) $1,558.
B) $1,403.
C) $1,935.
D) $2,090.
24) Insurance paid in advance by employers to protect their employees against loss due to injury or death
incurred during employment is:
A) life insurance.
B) worker’s compensation insurance.
C) liability insurance.
D) health insurance.
25) When calculating the employer’s payroll tax expense the clerk forgot about the wage base limits, this
will cause:
A) the expenses to be overstated.
B) the assets to be overstated.
C) the liabilities to be overstated.
D) Both A and C are correct.
26) Workers’ compensation provides insurance for employees who are:
A) unemployed due to an economic downturn.
B) unemployed due to a plant closing.
C) injured while on the job.
D) not paid enough.
27) A FUTA tax credit:
A) is given to employers who pay their state unemployment taxes on time.
B) is usually in the amount of 5.4%
C) is applied against the 6.2% standard rate.
D) All of the above are correct.
28) Generally, employers can take a credit against the FUTA tax for contributions paid into the state
unemployment funds.
29) Each state is responsible for administering an unemployment program.
30) The cost of workers’ compensation insurance must be estimated and paid in advance by the employer.
31) The premium rate for workers’ compensation is based on the type of work performed.
32) The employer’s payroll taxes are deducted from the employee‘s paycheck.
33) FUTA and SUTA are paid for exclusively by the employee.
34)
Employer
Employee
FICA-OASDI
Employer
Employee
FICA-OASDI
35)
Employer
Employee
FICA-Medicare
Employer
Employee
FICA-Medicare
36)
Employer
Employee
Federal income tax
Employer
Employee
Federal income tax
37)
Employer
Employee
State income tax
Employer
Employee
State income tax
38)
Employer
Employee
FUTA
Employer
Employee
FUTA
39)
Employer
Employee
SUTA
Employer
Employee
SUTA
40)
Employer
Employee
Gross wages
Employer
Employee
Gross wages
41)
Employer
Employee
Worker’s compensation
Employer
Employee
Workers’ compensation
42)
Employer
Employee
Union Dues
Employer
Employee
Union Dues
43) The employees collectively earn a gross wage of $90,000 for the pay period. But the employer says
that they cost $97,000. Discuss the discrepancy.
44) What is required of an employer by the Federal Insurance Contributions Act?
45) Compute the net pay for each employee. The FICA tax rate is: OASDI 6.2% on a limit of $106,800;
Medicare is 1.45%; federal income tax is 15%; state income tax is 5%; and medical insurance is $100 per
employee.
Cumulative Pay This Week’s Pay
Sarah Ahti $75,000 $4,000
Matt DeFore $62,000 $2,000
46) From the following data, determine the FUTA tax liability for Evans Company for the first quarter.
The FUTA tax rate is 0.8% on the first $7,000 of earnings. (Assume all quarters have 13 weeks.)
Employees Gross Pay Per Week
C. Otto $2,000
K. Yankee 800
E. Lanava 1,400
7.3 Learning Objective 7-3
1) Which tax does not have a wage base limit?
A) State unemployment tax
B) Federal unemployment tax
C) FICA-Medicare
D) FICA-OASDI
2) The payroll register:
A) is a worksheet.
B) shows all employee information related to an entire pay period.
C) keeps track of an individual employee’s payroll history for a calendar year.
D) Both A and B are correct.
3) The employee earnings record:
A) shows all employee information related to an entire pay period.
B) keeps track of an individual employee’s payroll history for a calendar year.
C) is one of two primary records used to track payroll information.
D) Both B and C are correct.
4) To examine in detail the weekly payroll of all employees, one would look at the:
A) W-2.
B) W–4.
C) payroll register.
D) employee earnings record.
5) The payroll register includes sections for recording:
A) gross pay, deductions, and net pay.
B) assets, liabilities, equity, revenues, and expenses.
C) trade accounts receivable and short-term note receivables.
D) accrued expenses, unearned revenues, and net pay.
6) Which report would an employer review if they wanted to check how much an employee has earned to
date?
A) Individual employee earnings record
B) Payroll register
C) W-4 form
D) None of these answers are correct.
7) The payroll information for a pay period is found in the payroll register.
8) The taxable earnings column of the payroll register records the tax due.
9) The use of a payroll register to record a company’s payroll is optional.
10) Explain the purpose of workers’ compensation, and discuss the premium cost to the employer.
7.4 Learning Objective 7-4
1) The individual employee earnings record provides a summary of the following for a single employee,
except:
A) earnings.
B) withholding taxes.
C) net pay.
D) allowances.
2) A calendar quarter consists of:
A) 13 weeks.
B) 12 weeks.
C) 14 weeks.
D) 4 months.