College Accounting, 12e (Slater)
Chapter 8 Paying, Recording, and Reporting Payroll and Payroll Taxes: The
Conclusion of the Payroll Process
8.1 Learning Objective 8-1
1) Prepaid Worker’s Compensation Insurance is what type of account?
A) Asset
B) Expense
C) Liability
D) Revenue
2) What type of an account is Wages and Salaries Payable?
A) Asset
B) Liability
C) Revenue
D) Expense
3) The Wages and Salaries Expense account would be used to record:
A) net earnings for the office workers.
B) a credit to the amount owed to the office workers.
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.
B) net earnings of the employees not paid.
C) cumulative earnings of the employees
D) the paid portion of the earnings.
5) Payroll Cash is a(n):
A) revenue.
B) liability.
C) asset.
D) expense.
6) What type of account is Payroll Tax Expense?
A) Asset
B) Liability
C) 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) the look-back period.
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 are correct.
10) What is debited if State Unemployment Tax Payable (SUTA) is credited?
A) Payroll Tax Expense
B) Cash
C) Salaries Payable
D) Salaries Expense
11) The entry to record the payroll tax expense would include:
A) a credit to Federal Income Taxes Payable.
B) a credit to Cash.
C) a credit to FICA (OASDI and Medicare) Taxes Payable.
D) a credit to Wages Payable.
12) The employer’s total FICA, SUTA, and FUTA tax is recorded as:
A) a debit to Payroll Tax Expense.
B) a credit to Payroll Tax Expense.
C) a credit to Payroll Tax 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-Social Security Tax Payable increases on the credit side of the account.
C) Payroll Tax Expense increases on the debit side of the account.
D) SUTA Tax Payable increases on the debit side of the account.
14) Which of the following statements is true?
A) Payroll Tax Expense increases on the debit side of the account.
B) FICA-Social Security Tax Payable is a liability.
C) Payroll Tax Expense has a debit normal balance.
D) All of these answers are correct.
15) As the Prepaid Workers Compensation is recognized, the amount will transfer to:
A) Workers Compensation Insurance Payable.
B) Workers Compensation Insurance Expense.
C) Cash.
D) Payroll Tax Expense.
16) Grammy’s Bakery had the following information for the pay period ending June 30:
Employee
Name
Pay
rate
Hours
worked
Cumulative
earnings
Department
Federal
income tax
withheld
P. Ganster
$ 2,000
Salaried
$ 12,000
Kitchen
$ 86.00
T. Baker
10.00/hr
50
6,500
Office
22.00
Assume:
FICA-OASDI applied to the first $106,800 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 Salaries Expense?
A) Debit $550
B) Credit $550
C) Debit $500
D) Credit $500
17) Grammy’s Bakery had the following information for the pay period ending June 30:
Employee
Name
Pay
rate
Hours
worked
Cumulative
earnings
Department
Federal
income tax
withheld
P. Ganster
$ 2,000
Salaried
$ 12,000
Kitchen
$ 86.00
T. Baker
10.00/hr
50
6,500
Office
22.00
Assume:
FICA-OASDI applied to the first $106,800 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 $12,000
B) Credit $12,000
C) Debit $2,000
D) Credit $2,000
18) Great Lakes Tutoring had the following payroll information on February 28:
Employee
Gross Pay
Cumulative Earnings
Prior to this Payroll
R Hill
$4,000
$4,000
Assume:
FICA tax rates are: OASDI 6.2% on a limit of $106,800 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 Great Lakes Tutoring
would include:
A) a debit to Payroll Tax Expense in the amount of $390.
B) a credit to FUTA Payable for $24.
C) a credit to SUTA Payable for $60.
D) All of the above are correct.
19) Great Lakes Tutoring had the following payroll information on February 28:
Employee
Gross Pay
Cumulative Earnings
Prior to this Payroll
R Hill
$4,000
$4,000
Assume:
FICA tax rates are: OASDI 6.2% on a limit of $106,800 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 employee’s tax expense would include:
A) a debit to Payroll Tax Expense in the amount of $4,000.
B) a debit to Wages and Salaries Expense in the amount of $4,000.
C) a credit to Cash in the amount of $4,000.
D) a credit to FUTA Payable for $24.
20) Wages and Salaries Expense is:
A) equal to net pay.
B) equal to gross pay.
C) equal to the employer’s taxes.
D) None of the above are correct.
21) An employer must always use a calendar year for payroll purposes.
22) The balance in the Wages and Salaries Expense account is equal to net pay.
23) The payroll tax expense is recorded at the same time the payroll is recorded.
24) There is no limit on the amount of taxes paid for SUTA.
25) FIT Payable has a credit normal balance.
26) FICA taxes are levied only on employees.
27) Using the information below, determine the amount of the payroll tax expense for B. Harper
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. Addington $550
K. Wilcox 400
T. Sharma 320
Assume:
FICA tax rates are: OASDI 6.2% on a limit of $106,800 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
28) 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 $106,800 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.
29) Sweetman’s Recording Studio payroll records show the following information:
Cumulative Earnings Weekly
Before Payroll Salary
D. Gordon $20,000 950
Assume the following:
a) FICA: OASDI, 6.2% on a limit of $106,800; 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.
30) 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 $106,800; Medicare, 1.45%
b) Federal income tax is 15% of gross pay
c) Each employee pays $20 per week for medical insurance
31) 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 payroll tax expense entry.
32) 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%
Required: Prepare the payroll tax expense entry.
33) 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 $1,000
D. Monaghan 14,000 600
T. Delcotto 5,000 400
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) Wages and Salaries Expense
C) Payroll Expense
D) SUTA Payable
3) 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.
4) 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
5) The entry to record the payment of taxes withheld from employees and FICA taxes would be to:
A) credit Cash; debit FICA-Social Security Payable, FICA-Medicare Payable, and Federal Income Tax
Payable.
B) debit Cash; credit FICA-Social Security Payable, FICA-Medicare Payable, and Federal Income Tax
Payable.
C) credit Cash; credit FICA-Social Security Payable, FICA-Medicare Payable, and Federal Income Tax
Payable.
D) None of these answers are correct.
6) The employer records deductions from the employee’s paycheck:
A) as debits to expense accounts.
B) as credits to liability accounts until paid.
C) as debits to asset accounts until paid.
D) as credits to capital accounts.
7) Form 941 taxes include OASDI, Medicare, and federal unemployment tax.
8) Different deposit rules apply to employers based on the amount collected and owed by that employer.
9) Businesses will make their payroll tax deposits based on payroll taxes collected.
10) Why are the employee deductions recorded as payables on the employer’s books?
11) Why are all of the employer payroll taxes listed in separate payable accounts?
12) Compute the total regular earnings. ________
13) Compute the total overtime earnings. ________
14) Compute the total gross earnings. ________
15) Compute the employees’ FICA-OASDI. ________
16) Compute the employees’ FICA-Medicare. ________
17) Compute the total federal income tax. ________
18) Compute the total state income tax. ________
19) Compute the employers payroll tax. ________
20) Compute the total deductions. ________
21) Compute the net pay. ________
22) Prepare the general journal entry to record the payroll.
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23) Prepare the general journal entry to record the employer’s payroll tax expense.
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