Payroll Accounting 2017 27th Edition

Bieg Solutions Manual

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 2017 e d i t i o n TEST 4

PAYROLL Student

Chapter 4
INSTRUCTOR’S COPY

Date
SCORING RECORD

ACCOUNTING Section Total Points

A
B
20
50
Deductions Score

Bieg/Toland C
Total
30
100

Section A—DIRECTIONS: Complete each of the following sentences by writing in the Answers column the
letter of the word or words that correctly completes each statement. (2 points for each correct answer)
For
Answers Scoring
1. Which of the following fringe benefits is taxable? (A) membership in a country club, (B) use of on-
premise athletic facility, (C) job-placement assistance, (D) qualified employee discounts, (E) re-
duced tuition for education.............................................................................................................. A 1.
2. All of the following persons are classified as employees under the federal income tax withholding
law with the exception of (A) a first-line supervisor, (B) the president of a corporation, (C) a
partner, (D) an elected official in the state government, (E) an officer of the federal government...... C 2.
3. If an employee files an amended W-4, the employer must make the W-4 effective no later than
the (A) next payday, (B) start of the first payroll period ending on or after the 30th day from the
W-4 receipt date, (C) 10th day from the W-4 receipt date, (D) first pay in the next quarter,
(E) first pay in the next year. ........................................................................................................... B 3.
4. Ron Case, married with four dependents, failed to complete and file Form W-4 with his employer.
The employer should (A) withhold federal income taxes as if Case were single and claimed
six allowances, (B) withhold federal income taxes as if Case were married and claimed no
allowances, (C) withhold federal income taxes at a rate of 25% of Case’s wages, (D) refuse to pay
Case until his Form W-4 is filed, (E) take none of the above actions. ............................................... E 4.
5. Employers must submit Forms W-4 to the IRS for (A) all Forms W-4, (B) those claiming more
than 10 allowances, (C) all Forms W-4 claiming exemption, (D) those requested in writing by
the IRS, (E) those requesting additional amounts to be withheld. ..................................................... D 5.
6. The withholding on vacation wage payments is (A) a flat 15%, (B) based on the total amount of
the wage payment plus the vacation pay, (C) taxed as though it were a regular payment for the
periods occurring during the vacation period, (D) tax-free, (E) a flat 25%. ....................................... C 6.
7. A publisher is preparing information returns to report the royalties paid to authors (nonemployees)
during the prior calendar year. The proper information return to be completed is (A) Form W-2,
(B) Form W-3, (C) Form 1099-MISC, (D) Form 1099-DIV, (E) any of the above forms. ................. C 7.
8. Which of the following forms is not completed by the employer? (A) W-2, (B) W-3, (C) Form
941, (D) W-4, (E) Form 1099-MISC ............................................................................................... D 8.
9. Both the percentage method and the wage-bracket method of withholding have each of the
following characteristics except (A) unmarried persons are distinguished from married persons,
(B) a table of allowances values is used, (C) employees are given the full benefit of the allowances
they claim, (D) tables and wage-bracket charts are used to determine the amount withheld,
(E) the standard deduction is taken into account. ............................................................................. B 9.
10. Wolf Company is giving a net bonus check of $500 to all of its employees. If each of the payments
are subject to FIT (25% supplemental rate) and FICA taxes, but no state taxes, the gross amount of
each bonus check would be (A) $742.39*, (B) $663.75, (C) $656.00, (D) $662.75, (E) none of these. ........... A 10.
* $500 
 
 1  0.25  0.062  0.0145 

ATS–7
© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
ATS–8 Chapter 4/Achievement Test Solutions

Section B—DIRECTIONS: Complete the fol- Note: Carry each overtime hourly rate out to 3
lowing payroll register for employees of Corby decimal places and then round off to 2 decimal
Company for the week ended March 3. Taxable places.
earnings should be computed on the basis of a 40-
All employees’ wages are subject to the
hour week with overtime earnings being paid at
OASDI tax of 6.2% and the HI tax of 1.45%. The
time and one-half for all hours over 40 each work-
supplemental HI rate of 0.9% is not applicable.
week (no overtime for salaried employees).
(left side)
PAYROLL REGISTER
FOR WEEK ENDING March 3
TIME RECORD REGULAR EARNINGS
EMPLOYEE’S

WEDNESDAY

NO. HOURS
(REGULAR)
THURSDAY

SATURDAY

RATE PER
TUESDAY
CLAIMED
MARITAL

MONDAY
NO. W/H
STATUS

ALLOW.

FRIDAY

HOUR
NO.

AMOUNT

41 S 2 8 7½ 8 9 8 5½ 40 12.00 480.00
32 M 5 8 10 10 9 8½ 4 40 S 1,600.00
63 M 0 8 8 8 8 8 … 40 13.00 520.00
54 S 1 9 8 10 8 8 4 40 12.00 480.00
45 M 2 10 8 8 9 8 4½ 40 12.50 500.00
16 S 0 8 9 10 9 8 4 40 12.75 510.00
7 S 1 5 6 8 8 8 4 39 12.00 468.00
28 M 3 8 8 8 8 8 … 40 12.00 480.00
49 M 0 8 9 8 8 9 6 40 12.00 480.00
10 S 1 8 8 0 9 10 5 40 S 1,450.00
TOTALS ............................................................................... … … 6,968.00

Amount of One Withholding Allowance Weekly $77.90

Source: Internal Revenue Service.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
Chapter 4/Achievement Test Solutions ATS–9

Use the partial wage-bracket tables provided
to determine the amount of federal income tax to
be withheld. For the salaried employees (#32 and
#10), use the percentage method table.
(right side)
All workers are employed in a state that im-
poses a 2% income tax on the gross wages earned
by each worker.
(1 point for each correct answer—exclude totals
row)

20 --

OVERTIME EARNINGS DEDUCTIONS NET PAY

EMPLOYEE’S
FICA TAXES
RATE PER

NO.
HOURS

TOTAL FEDERAL STATE CHECK

HOUR
(O/T)
NO.

EARNINGS INCOME TAX INCOME NO.

AMOUNT OASDI HI TAX AMOUNT

6 18.00 108.00 $ 588.00 $ 36.46 $ 8.53 $ 49.00 $ 11.76 411 $ 482.25 41

… … … 1,600.00 99.20 23.20 139.13* 32.00 412 1,306.47 32
… … … 520.00 32.24 7.54 36.00 10.40 413 433.82 63
7 18.00 126.00 606.00 37.57 8.79 64.00 12.12 414 483.52 54
7½ 18.75 140.63 640.63 39.72 9.29 32.00 12.81 415 546.81 45
8 19.13 153.04 663.04 41.11 9.61 84.00 13.26 416 515.06 16
… … … 468.00 29.02 6.79 43.00 9.36 417 379.83 7
… … … 480.00 29.76 6.96 9.00 9.60 418 424.68 28
8 18.00 144.00 624.00 38.69 9.05 51.00 12.48 419 512.78 49
… … … 1,450.00 89.90 21.03 250.93** 29.00 420 1,059.14 10
… 671.67 $7,639.67 $473.67 $110.79 $758.06 $152.79 … $6,144.36
* $1,600.00 – 5($77.90) = $1,210.50 – $521.00 = $689.50 × 0.15 = $103.43 + $35.70 = $139.13
** $1,450.00 – 1(77.90) = $1,372.10 – $767.00 = $605.10 × 0.25 = $151.28 + $99.65 = $250.93

Source: Internal Revenue Service.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.
ATS–10 Chapter 4/Achievement Test Solutions

Section C—DIRECTIONS: Each of the following statements is either true or false. Unless directed otherwise
by your instructor, indicate your choice in the Answers column by writing “T” for a true answer or “F” for a false
answer. (1/2 point for each correct answer)
For
Answers Scoring
1. A sole proprietor with two employees is exempt from the requirements of the federal income tax
withholding law. ............................................................................................................................. F 1.
2. Not-for-profit corporations that are exempt from federal income taxes do not withhold federal in-
come taxes from their employees’ pay. ............................................................................................ F 2.
3. Cash tips of $20 or more in a month must be reported to the employer by the tipped employee by
the end of the following month........................................................................................................ F 3.
4. Employees who regularly receive cash tips of $20 or more in a calendar month are subject to
federal income tax withholding on the tips. ..................................................................................... T 4.
5. Employees receiving over $1 million in supplemental wages for the year will have a 39.6% with-
holding rate apply to the supplemental payments in excess of $1 million.......................................... T 5.
6. Employees’ payroll deductions into their 401(k) plans are generally made on a pretax basis and
reduce the amount of gross pay that is subject to federal income tax withholding. ............................ T 6.
7. A worker with three employers should claim at least one withholding allowance with each
employer. ....................................................................................................................................... F 7.
8. The number of withholding allowances claimed by an employee is set forth on Form W-2. .............. F 8.
9. Withholding allowance certificates must be retained by employers for as long as the certificates
are in effect and for four years thereafter. ........................................................................................ T 9.
10. An employee filed a Form W-4 and claimed 22 withholding allowances. The employer should
withhold 25% of the worker’s gross earnings for federal income taxes until the Form W-4 is
approved by the IRS. ...................................................................................................................... F 10.
11. Unmarried persons are distinguished from married persons under both the percentage method
and the wage-bracket method of withholding................................................................................... T 11.
12. Vacation pay is to be paid at the same time as a regular wage payment. In this case, the vacation
pay must be combined with the regular wage payment and federal income taxes calculated on the
amount of the total payment. ........................................................................................................... F 12.
13. In the IRA form of a simple retirement account, employers can contribute as much as they want
into the employee’s simple retirement account, even though the employee’s contribution is
limited to $12,500. .......................................................................................................................... F 13.
14. The Wage and Tax Statement must be furnished to an employee on or before February 28
following the close of the calendar year........................................................................................... F 14.
15. If an employee who left the company requests a W-2 before the end of the year, it must be
furnished within 30 days of the request or the final wage payment (whichever is later)..................... T 15.
16. The maximum contribution that an employee (age 40) can make into a 401(k) plan that is not
taxed for federal income tax withholding purposes is $25,000.......................................................... F 16.
17. Form W-3 is filed with the Social Security Administration by employers as a transmittal of the
information contained on Forms W-2. ............................................................................................. T 17.
18. Employers cannot send Forms W-2 to employees electronically. ..................................................... F 18.
19. To correct errors on previously filed Forms W-2, an employer must file Form W-3. ........................ F 19.
20. Contributions made by the employer into employees’ health savings accounts are excluded from
the employees’ taxable income........................................................................................................ T 20.

© 2017 Cengage Learning®. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.