Payroll Accounting: Earnings, Deductions, and Liabilities

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1. 1

   An hourly employee earns $20 per hour and receives 1.5 times the regular rate for hours above 40. According to the timecard, the employee worked 42 hours. What is the employee's gross pay?

   

   A $860 B $840 C $880
2. 2

   Which formula correctly calculates an employee's net pay?

   A Gross pay plus employee deductions B Gross pay minus employee deductions C Gross pay minus employer payroll taxes only
3. 3

   A payroll summary shows gross wages of $10,000, federal income tax withheld of $1,200, employee FICA withheld of $765, and other employee deductions of $235. Which entry correctly records the employee payroll?

   

   A Debit Wages Expense $7,800; credit Cash $7,800 B Debit Wages Expense $10,000; credit Cash $10,000 C Debit Wages Expense $10,000; credit liabilities $2,200 and Cash $7,800
4. 4

   A company has employer FICA taxes of $3,825 and unemployment taxes of $400 for a payroll period. Employees also had $6,000 of federal income tax withheld. What amount should the company record as employer payroll tax expense?

   A $4,225 B $10,225 C $3,825
5. 5

   How should employee FICA taxes withheld but not yet remitted be classified in the employer's accounts?

   A An operating expense B A current liability C Other revenue
6. 6

   Employees earned $12,000 during the final three days of December, but the wages will be paid in January. Which year-end adjusting entry is required?

   

   A Debit Wages Payable and credit Wages Expense for $12,000 B Debit Prepaid Wages and credit Cash for $12,000 C Debit Wages Expense and credit Wages Payable for $12,000
7. 7

   Which situation most clearly supports accruing a liability for employee vacation benefits under accrual accounting?

   A The benefits accumulate or vest, relate to service already performed, and are probable and reasonably estimable B The benefits are recorded only when employees receive cash C Management may cancel the nonaccumulating benefits at any time without obligation
8. 8

   An employer withholds a court-ordered wage garnishment from an employee's pay. How is the withheld amount recorded until it is sent to the designated recipient?

   A As a reduction of the employer's wage expense B As a payroll deduction liability C As an increase in retained earnings
9. 9

   What is the primary purpose of the payroll document shown?

   

   A To calculate the depreciation of payroll equipment B To replace all employee tax reporting forms C To summarize each employee's earnings, deductions, and net pay for a pay period
10. 10

    Which division of duties provides the strongest internal control over payroll?

    

    A Human resources authorizes employees and pay rates, supervisors approve time, payroll processes records, and treasury distributes payments B One payroll clerk adds employees, approves hours, changes pay rates, and releases payments C Department supervisors create employees and reconcile the payroll bank account
11. 11

    Which U.S. form generally reports an individual employee's annual wages and taxes withheld?

    A Form W-4 B Form W-2 C Form 941
12. 12

    What is generally reported by a U.S. employer on Form 941?

    A Annual depreciation and capital gains B Only state unemployment taxes C Quarterly federal income tax withholding and Social Security and Medicare taxes
13. 13

    How should an employer normally record its matching contribution to an employee retirement plan?

    A Debit Employee Benefits Expense and credit Cash or a contribution payable B Debit the employee's wage withholding liability and credit Revenue C Debit Cash and credit Wages Expense
14. 14

    The payroll summary shows gross pay of $18,000, employee deductions of $4,100, and employer payroll taxes of $1,500. How much cash is paid directly to employees?

    

    A $12,400 B $13,900 C $16,500
15. 15

    A Payroll Payable account was credited for $30,000 of net payroll and debited for $28,500 of payments. What is its ending balance?

    

    A Zero B $1,500 debit C $1,500 credit
16. 16

    Which entry records the remittance of employee taxes and deductions that were previously withheld and recognized as liabilities?

    A Debit the applicable payroll liabilities and credit Cash B Debit Payroll Tax Expense and credit the payroll liabilities C Debit Cash and credit Wages Expense
17. 17

    At year-end, a performance bonus relating to the current year's employee service is probable and can be reasonably estimated. It will be paid next year. How should it be accounted for?

    A Recognize no amount until the cash is paid B Recognize compensation expense and a liability in the current year C Record it as a prepaid asset in the current year
18. 18

    A payroll bank reconciliation shows a bank balance of $45,000, outstanding payroll checks of $3,400, and a deposit in transit of $600. Which treatment produces the adjusted bank balance?

    

    A Add both the outstanding checks and the deposit in transit B Subtract both the outstanding checks and the deposit in transit C Subtract outstanding checks and add the deposit in transit
19. 19

    A company reports gross wages of $80,000, employer payroll taxes of $6,500, employer-paid benefits of $4,000, and employee deductions of $15,000. What is the company's total payroll-related labor cost?

    A $90,500 B $75,500 C $105,500