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College Accounting A Career Approach
12th Edition Scott Test Bank

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Chapter 7—Employee Earnings and Deductions
MULTIPLE CHOICE
1. A person who performs a service for a fixed amount and is not under the specific direction of the party
being served is called
a. an employer.
b. an employee.
c. an independent contractor.
d. either an employer or an employee.
e. a company's manager.
ANS: C PTS: 1 DIF: Difficulty: Easy
OBJ: LO: 7-1 NAT: AACSB: Reflective Thinking
STA: AICPA-FN: Measurement|ACBSP: Payroll/Other Compensation
KEY: Bloom's: Knowledge
2. Types of compensation that an employee might receive include

a. a bonus.
b. cost of living adjustments.
c. profit sharing.
d. a commission.
e. all of these.
ANS: E PTS: 1 DIF: Difficulty: Easy
3. The total amount of employee compensation before deductions are taken out is referred to as
a. gross pay.
b. net pay.
c. compensation after withholdings.
d. take-home pay.
e. merit pay.
ANS: A PTS: 1 DIF: Difficulty: Easy
4. Mindy receives an annual salary of $25,500 plus a 5 percent commission on all sales during the year in
excess of $100,000. Her sales for the year total $210,000. Her total earnings amount to
a. $31,000.
b. $26,775.
c. $36,000.
d. $30,500.
e. $25,500.
ANS: A PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 7-2 NAT: AACSB: Analytic
KEY: Bloom's: Application
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accessible website, in whole or in part.
5. Roscoe's employer pays time-and-a-half for all hours worked in excess of 8 hours per day and double
time for all hours worked on Sundays. Roscoe's regular hourly rate is $9 per hour. During the week,
Roscoe worked the following hours: Monday, 8; Tuesday, 8; Wednesday, 9; Thursday, 10; Friday, 8;
Sunday, 6. Total gross wages are
a. $661.50.
b. $540.00.
c. $441.00.
d. $481.50.
e. $508.50.
ANS: E PTS: 1 DIF: Difficulty: Moderate
6. An employer may withhold portions of an employee's total earnings for

a. state and county sales taxes.
b. charitable contributions.
c. local property taxes.
d. state unemployment taxes.
e. federal unemployment taxes.
ANS: B PTS: 1 DIF: Difficulty: Moderate
KEY: Bloom's: Comprehension
7. An amount of an individual's earnings that is exempt from income taxes is called a(n)
a. bonus.
b. employee deduction.
c. withholding allowance.
d. salary.
e. premium.
8. Regarding the federal income tax withholding tables, the amount of each employee's earnings withheld
is affected by the
a. number of exemptions claimed.
b. age of the employee.
c. number of years working for the company.
d. state where the employer is located.
e. number of years the company has been in business.
9. The employer records the amount of federal income tax withheld as

a. an expense.
b. an asset.
c. payroll tax expense.
d. a liability.
e. a contra asset.
ANS: D PTS: 1 DIF: Difficulty: Moderate
10. For which of the following taxes is there no ceiling on the amount of annual employee earnings subject
to the tax?
a. Federal income tax
b. Federal unemployment tax
c. FICA SS tax
d. Charitable contributions tax
e. State unemployment tax
11. For which of the following taxes is there a ceiling on the amount of annual employee earnings subject to
the tax?
a. Only the FICA tax
b. Only the FICA tax and the federal unemployment tax
c. Only the state and federal unemployment taxes
d. The FICA Social Security tax and the state and federal unemployment taxes
e. Only the FICA Medicare tax
ANS: D PTS: 1 DIF: Difficulty: Easy
12. To examine in detail the weekly payroll figures of all employees, one would look at
a. the payroll register.
b. the employee's individual earnings record.
c. time cards.
d. Form W-4.
e. the general ledger.
13. All of the following are optional deductions except

a. charitable contributions.
b. medical insurance.
c. union dues.
d. Medicare tax.
e. life insurance.
OBJ: LO: 7-3 | LO: 7-4 NAT: AACSB: Reflective Thinking
14. The portion of FICA taxes designated as Medicare is paid by

a. employees only.
b. the employer and the federal government.
c. both the employee and the employer.
d. either the employer or the employee, depending on the labor contract.
e. neither the employee nor the employer.
ANS: C PTS: 1 DIF: Difficulty: Moderate
OBJ: LO: 7-3 | LO: 7-4 NAT: AACSB: Analytic
15. Types of deductions from employees' earnings include

a. repayment of personal loans from a company credit union.
b. savings through a company credit union.
c. hospital and life insurance premiums.
d. all of these.
e. none of these.
16. Prior to the last weekly payroll period of this year, the cumulative earnings of Lenz and Trent are
$84,000 and $60,320, respectively. Their earnings for the present pay period ending December 18, are
Lenz, $2,310, and Trent, $2,010. Assuming that the Social Security tax is 6.2 percent on the first
$113,700 paid during the calendar year and the Medicare tax is 1.45 percent on all earnings paid during
the calendar year, the total amount of FICA taxes withheld this payroll period for both Lenz and Trent is
a. $62.64.
b. $267.84.
c. $187.27.
d. $125.28.
e. none of these.
ANS: E PTS: 1 DIF: Difficulty: Easy
17. In a payroll entry, a credit to Accounts Receivable indicates that

a. an employee is paying a bill owed to the company.
b. a customer is paying a bill owed to the company.
c. the employer is paying a bonus to the employee.
d. a mistake has been made in an employee's paycheck.
e. the company underpaid the employee the previous pay period.
18. The structure of the payroll entry to record the payroll is
a. debit Wages Payable; credit each employee deduction.
b. debit Wages Payable; credit Cash.
c. debit Wages Expense; credit each employee deduction; credit Salaries Payable.
d. debit Wages Expense; credit each employee deduction.
e. debit Wages Payable; credit Sales Expense; and credit Cash.
19. Net pay is equal to

a. take-home pay plus all deductions.
b. take-home pay minus all deductions.
c. gross pay plus all deductions.
d. gross pay minus all deductions.
e. gross pay minus only federal and state income taxes.
20. All of the following are payroll taxes that are expenses of the employer except
a. FICA Social Security taxes.
b. employee income taxes.
c. state unemployment taxes.
d. federal unemployment taxes.
e. FICA Medicare taxes.
21. The record maintained for each employee, listing the current data on that employee's earnings for the
period, deductions, and accumulated earnings, is the
a. employee's individual earnings record.
b. payroll register.
c. employee's wage and tax statement.
d. employee's withholding allowance (W-4) certificate.
e. Social Security record statement.
22. The source of information for the employee's individual earnings record is
a. the payroll register.
b. Form W-2.
c. Form W-4.
d. employees' time cards.
e. the general ledger.
23. The employee's individual earnings record includes

a. gross payroll for the pay period for all employees.
b. net payroll for the pay period for all employees.
c. the date the employee was hired.
d. the amount of federal unemployment taxes for the pay period.
e. the total amount of FICA and Medicare tax paid by the company for all employees.
24. The Fair Labor Standards Act of 1938 provides for

a. Minimum standards for wages and overtime
b. Provisions for child labor and equal pay for equal work
c. Exemptions for specified employees
d. All of the Above
25. The Social Security Act of 1935 was originally enacted to provide
a. Benefits for Spouses
b. Benefits for Minor Children
c. Benefits for Retired Workers
d. Disability Insurance
26. The 941 employer’s tax payment to the IRS consists of

a. Employee’s FICA Withheld
b. Employer’s matching FICA
c. Employee’s federal income tax withheld
d. A & B
e. All of the Above
27. The following payroll taxes that are strictly the employer’s responsibility
a. SUTA
b. FUTA
c. FICA SS Employee Withheld
d. Federal Tax Withheld
e. A&B
28. Which of the following payroll taxes is the employee’s responsibility

a. Federal Income Tax, FICA SS & Medicare, FUTA
b. Federal Income Tax, FUTA, SUTA
c. Federal Income Tax, FICA SS & Medicare
d. FICA SS & Medicare, FUTA, SUTA
29. Stacey works 38 hours in a week. How many hours of overtime will Stacey be paid?
a. 0
b. 3
c. 8
d. Can’t be determined from information
30. Sally worked 45 hours during the week at an hourly rate of $10 per hour. Assume that Sally’s overtime
rate is paid at time and a half over 40 hours. What is Sally’s gross pay for the week?
a. $325
b. $450
c. $475
d. $675
31. John Smith is paid $15 per hour and he worked 35 hours during the week. What is John’s gross pay?
a. $450
b. $525
c. $975
d. $1050
32. Bill Jones was hired as an apple picker. Bill’s pay will be based on a piece-rate system at the rate of
$4.50 per bag of apples picked. If Bill picks 20 bags a day, and works 4 days a week, what are his total
earnings.
a. $18
b. $90
c. $360
d. $450
33. Julie is employed as a salesperson at ABC Motors. She receives a salary of $1,200 a month, plus 15%
commissions on the profit from her sales during the month. If Julie’s sales profit for August is
$25,000 what is her total gross pay?
a. $1,200
b. $3,750
c. $2,550
d. $4,950
34. Flexible spending plans and 401(k) deductions are normally considered
a. Tax free earnings
b. Pre-tax deductions
c. Post-tax deductions
d. Normal tax deductions
35. What are the two parts of FICA taxes

a. Medical and Disability
b. Social Security and Disability
c. Social Security and Medicare
d. FUTA and SUTA
36. The Federal Insurance Contributions Act provides for which of the following
a. Retirement benefits when workers reach 62
b. Benefits for workers who become disabled after age 65
c. Health insurance for people after age 70
d. None of the above
37. Mary Reeves has gross wages of $1,500 for the week ending October 24. Mary’s total accumulated
gross wages earned this year, prior to this payroll, is $75,000. If the FICA rates are: Social Security:
6.2% on a limit of $113,700 and Medicare 1.45%. What are Mary’s FICA-Social Security and
FICA-Medicare taxes for the week?
a. $0; $21.75
b. $93.00; $0
c. $93.00; $21.75
d. There isn’t enough information to calculate
38. A law that regulates overtime earnings is called:

a. Federal Unemployment Tax Act
b. Tax Payment Act
c. Fair Labor Standards Act
d. Federal Insurance Contribution Act
39. Employees may be paid hourly or salary based on the following:

a. Type of work performed
b. Period of time covered
c. The employer’s discretion
d. A & B
40. What item is NOT used to calculate the federal income tax to be withheld by employers
a. Total Earnings
b. W-2
c. Publication 15 (Circular E)
d. W-4
a. $0; $36.25
b. $155.00; $36.25
c. $155.00; $0
d. $111.60; $36.25
a. $0; $43.50
b. $186.00; $43.50
c. $186.00; $0
d. $0; $0
43. Net pay is the same as

a. Total earnings
b. Take home pay
c. Earnings before taxes
d. Pay before deductions
ANS: B PTS: 1 DIF: Difficulty: Easy
44. Derrick Elder works 46 hours at a bakery, earning $13.50 per hour. Calculate Derrick’s weekly pay
assuming his overtime rate is 1.5.
a. $621.00
b. $661.50
c. $702.00
d. $931.50
45. James received $650 for working 40 hours. What is the hourly rate of pay for James?
a. $16.00
b. $16.04
c. $16.25
d. $16.50
46. Ashley earns an hourly rate of $15 and worked 48 hours in one week. She had taxes withheld totaling
$175 and union dues deducted for $50. Assuming that Ashley receives overtime at a rate of 1.5 what
would her net earnings be for the week?
a. $495
b. $555
c. $605
d. $225
47. Which of the following would NOT be an employee payroll deduction?

a. Federal Income Tax
b. State Income Tax
c. 401(k)
d. FUTA
48. The W-4 form lists all of all of the following EXCEPT one:
a. Lists the number of allowances claimed
b. Shows the filing status
c. Lists the employee’s Social Security Number
d. Lists the total wages to be earned
49. A twelve-month period beginning on January 1 and ending on December 31 of the same year is called a:
a. Fiscal Year
b. Annual Year
c. Accounting Year
d. Calendar Year
50. A plumber who sets his own work schedule is an example of:
a. Independent Contractor
b. Employee
c. Employer
d. Freelancer
51. The payroll register contains all of the following except:

a. Hours Worked
b. Cumulative Earnings
c. Federal Income Tax
d. W-4 Form
52. Which of the following statements is true about FICA Social Security and Medicare?
a. Employers match the employee’s deduction for FICA taxes.
b. Only employees have this deduction
c. Only employers are responsible for FICA taxes
d. Both FICA Social Security and Medicare have no wage ceilings
53. A law that protects employees and dependents against losses due to death or injury on the job is:
a. Fair Labor Standards Act
b. Federal Wage and Hour Act
c. Worker’s Compensation Laws
d. Social Security Act of 1935
54. An example of who is NOT most likely under the direct control of an employer and classified as an
independent contractor.
a. Clerical Worker
b. Factory Worker
c. Janitor
d. Janitorial Service
55. Which of the allowances listed below would have the most amount of taxes withheld for federal income
tax purposes?
a. S-0
b. S-1
c. S-2
d. S-3
56. In a payroll journal entry, a credit to Federal Withholding Tax Payable indicates
a. Federal taxes have been withheld from the employee and are a liability until paid to the
governing agency
b. Federal taxes have been paid to the governing agency
c. Federal taxes are due to be withheld from the employee
57. Pre-tax deductions mean

a. Taxes are calculated before deductions
b. Employee deductions that are not subject to income tax
c. Employees are subject to all taxes on the deduction
d. Taxes are optional
ANS: B PTS: 1 DIF: Difficulty: Easy
58. Jerry Whiten is paid a commission of 15% on sales he makes for XYZ Motors. What are Jerry’s total
earnings if he sold $55,000 last month?
a. $46,750
b. $8,250
c. $63,250
59. Totals for payroll journal entries are obtained from:

a. a payroll register
b. an employee’s pay check
c. a W-4 statement
d. a payroll bank account
TRUE/FALSE
60. A carpenter who decides his own hours is an example of an independent contractor.
ANS: T PTS: 1 DIF: Difficulty: Easy

61. Gross pay is the total amount of salary or wages before deductions and taxes.

62. Net pay is calculated as gross pay plus the FICA tax and the Medicare tax.
ANS: F PTS: 1 DIF: Difficulty: Easy

63. Federal unemployment laws protect employees and their dependents against losses due to death or injury
incurred on the job.

64. An independent contractor is one who is under the direct control of an employer.

65. An employee's total earnings for a payroll period are called gross pay.

66. Money paid to a person for managerial or administrative services is usually called wages, and the time
period covered is usually hours or weeks.

67. Gross pay less one or more deductions equals net pay.
68. A person who works for compensation under the direction and control of the employer is called an
independent contractor.

69. If an employee earning $10 per hour works 46 hours, the gross pay would amount to $490, assuming
time-and-a-half for over 40 hours worked per week.
ANS: T PTS: 1 DIF: Difficulty: Moderate

70. Employees who are paid a regular salary are not entitled to premium pay for overtime.

71. There is no ceiling on each employee's total earnings that are subject to federal income tax.

72. The amount of federal income tax withheld from an employee's paycheck is affected by whether the
employee claims to be single or married on the W-2 form.
ANS: F PTS: 1 DIF: Difficulty: Moderate

73. The payroll register contains the earnings of all the employees for the pay period.

74. Optional deductions would include employee income tax, Social Security tax, union dues, and insurance
premiums.

75. State and federal unemployment taxes are two required payroll deductions for employees.

76. All payroll deductions withheld from employees become an expense for the employer.

77. The Medicare tax is 6.2 percent of unlimited gross earnings.

78. Social Security taxes and Medicare taxes are paid by both the employer and the employee.

79. Assume that the last payroll period for the year ends on December 26. Prior to the last payroll period,
Roger's cumulative earnings are $67,500. If the Social Security tax is 6.2 percent of the first $113,700
and the Medicare tax is 1.45 percent of all earnings, then Roger's deduction for total FICA taxes on the
$5,200 gross earnings for the last payroll period would be $322.40.

80. There is no limit on each employee's total earnings that are subject to Medicare tax.

81. The FICA Tax Payable account is usually used for both the employees' and the employer's share of FICA
taxes (Social Security and Medicare).

82. In determining whether an employee's accumulated earnings have reached the maximum amount subject
to FICA tax deductions, the employer must use the calendar year, even if the business operates on a
fiscal year ending June 30.

83. If employees are paid by checks from the firm's regular bank account, the Salaries Payable account is
necessary in the payroll entry.

84. Businesses with several employees may prefer to maintain a separate checking account for the payment
of payroll.

85. Assuming that a payroll bank account is used, when the payroll is initially recorded, Salaries Payable is
credited for total take-home pay.

86. The journal entry for recording the payroll is based on certain column totals of the payroll register.

87. An employee's individual earnings record is a supplementary record showing cumulative earnings and
deductions for all his or her pay periods.

88. Employees' individual earnings records are not needed for salaried workers.

MATCHING
Match the terms below with the correct definitions.

a. FICA taxes
b. Payroll register
c. Employer
d. Gross pay
e. Workers' compensation laws
f. Employee's withholding allowance certificate (W-4)
g. Exemptions
h. Independent contractor
i. FUTA taxes
j. Employee's individual earnings record
89. An employee's total pay before any deductions
90. Collects taxes for the federal and state governments
91. Self-employed person
92. The form that specifies the number of exemptions claimed by each employee
93. Withholding allowances
94. Taxes paid only by employers under the provisions of the Federal Unemployment Tax Act
95. Employee's record that shows personal payroll data
96. State laws guaranteeing benefits for employees killed or injured on the job
97. Social Security taxes paid by both employers and employees
98. A form that summarizes payroll information for a given payroll period
89. ANS: D PTS: 1 DIF: Difficulty: Easy

90. ANS: C PTS: 1 DIF: Difficulty: Easy
91. ANS: H PTS: 1 DIF: Difficulty: Easy
92. ANS: F PTS: 1 DIF: Difficulty: Easy
93. ANS: G PTS: 1 DIF: Difficulty: Easy
94. ANS: I PTS: 1 DIF: Difficulty: Easy
95. ANS: J PTS: 1 DIF: Difficulty: Easy
96. ANS: E PTS: 1 DIF: Difficulty: Easy
97. ANS: A PTS: 1 DIF: Difficulty: Easy
98. ANS: B PTS: 1 DIF: Difficulty: Easy
SHORT ANSWER
99. Compare and contrast an employee and an independent contractor.
ANS:
Compare − Both paid by business.
Contrast − Independent contractor paid per job and chooses how to complete job. Employee works
specific hours and completes work based on employer control.
PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 7-1

NAT: AACSB: Communication
100. Explain the difference between gross and net pay, including how each is calculated.
ANS:
Gross pay is total amount of an employee's pay before deductions, which is calculated either by an
hourly rate wage, fixed salary amount, or by piece rate. Net pay is the amount of the take-home pay,
which is calculated by taking gross pay minus deductions like taxes, dues, and/or contributions.
PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 7-2 | LO: 7-3

101. Define taxable earnings, how they relate to the payroll register, and how they are calculated.
ANS:
The Taxable Earnings columns of a payroll register pertain to federal and state unemployment taxes, as
well as FICA taxes consisting of Social Security and Medicare taxes. The Taxable Earnings columns
represent the bases on which the taxes will be applied, not the taxes themselves. The bases are the
cumulative earnings of each employee since January 1 of the current year, up to a maximum amount
established for each tax. The taxable amount of the current pay period's gross pay for each employee is
recorded in the Taxable Earnings columns up to the assumed limits for state unemployment (the first
$7,000), federal unemployment (the first $7,000), FICA Social Security (the first $113,700), and FICA
Medicare (all earnings). After an employee reaches the limit during the calendar year, no earnings are
recorded in the columns, and thus no tax amounts are computed for that tax.
PTS: 1 DIF: Difficulty: Challenging OBJ: LO: 7-3 | LO: 7-4

102. Explain the similarities and differences in the payroll register and the employee's individual earnings
record.
ANS:
The payroll register is a form that summarizes the information about employees' wages and salaries for a
given payroll period. The employee's individual earnings record also has detailed payroll information,
also shown in the payroll register, but is a summary of only one employee's payroll history. The
employee's individual earnings record also fulfills record keeping requirements for various laws related
to payroll. It contains personal data about the employee in addition to what appears on the payroll
register, as well as date hired, date terminated, and pay rates. The payroll register is for one pay period
and includes all employees, whereas the employee's individual earnings record shows all pay periods for
one employee in addition to personal information about the employee.
PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 7-4 | LO: 7-6

PROBLEM
103. James Company has the following payroll information for the week ended December 18:
Earnings
Beginning Ending
Total Cumulative Cumulative
Name Hours Earnings Regular Overtime Total Earnings Unemployment
Akers, M. 40 22,370.00 2,034.00 0.00
Cham, T. 41 91,800.00 2,500.00 0.00
Grim, W. 44 16,904.00 1,726.00 0.00
Liski, S. 45 32,850.00 2,986.00 0.00
Regal, J. 40 90,900.00 3,450.00 0.00
254,824.00 12,696.00 0.00
James Company
Payroll Register for Week Ended December 18, 20⎯
Taxable Earnings Deductions Payments
Federal State Social
Social Income Income Security Medicare Net Ck.
Security Medicare Tax Tax Tax Tax Total Amount No.
1260
293.20 58.64
1261
433.14 86.63
1262
280.93 56.19
1263
686.05 137.21
1264
659.20 131.84
Taxable earnings for Social Security are based on the first $106,800. Taxable earnings for Medicare are
based on all earnings. Taxable earnings for federal and state unemployment are based on the first $7,000.
Employees are paid time-and-a-half for work in excess of 40 hours per week.
Instructions:
1. Complete the payroll register below. Use 6.2 percent for calculating Social Security tax
and 1.45 percent for calculating Medicare tax.
2. Based on the payroll register you created, prepare the journal entry to record the payroll
for the week of December 18, 20⎯.
ANS:
Earnings
Beginning Ending
Akers, M. 40 22,370.00 2,034.00 0.00 2,034.00 24,404.00 0.00
Cham, T. 41 91,800.00 2,500.00 93.75 2,593.75 94,393.75 0.00
Grim, W. 44 16,904.00 1,726.00 258.90 1,984.90 18,888.90 0.00
Liski, S. 45 32,850.00 2,986.00 559.88 3,545.88 36,395.88 0.00
Regal, J. 40 90,900.00 3,450.00 0.00 3,450.00 94,350.00 0.00
254,824.00 12,696.00 912.53 13,608.53 268,432.53 0.00
James Company
Payroll Register for Week Ended December 18, 20⎯

2,034.00 2,034.00 293.20 58.64 126.11 29.49 507.44 1260
1,526.56
2,593.75 2,593.75 433.14 86.63 160.81 37.61 718.19 1261
1,875.56
1,984.90 1,984.90 280.93 56.19 123.06 28.78 488.95 1262
1,495.95
3,545.88 3,545.88 686.05 219.84 51.42 1263
137.21 1,094.52 2,451.36
3,450.00 659.20 213.90 50.03 1264
3,450.00
131.84 1,054.97 2,395.04
13,608.53 13,608.53
GENERAL JOURNAL PAGE

Post.
Date Description Ref. Debit Credit
20⎯
Dec. 18 Wages Expense 13,608.53
Employees' Federal Income Tax Payable 2352.51
FICA Taxes Payable 1,041.05
Employees' State Income Tax Payable 470.50
Wages Payable 9,744.47
PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 7-4

NAT: AACSB: Analytic
104. Alpine Homes has the following payroll information for the week ended June 27. State income tax is
computed as 20 percent of federal income tax.
Daily Time
Earnings
at End of Federal
Previous Pay Income
Name Week S M T W T F S Rate Tax
Grant, L. 7,536.00 8 8 8 8 8 18.00 47.00
Hamm, R. 6,496.00 8 8 8 8 8 18.10 48.00
Lisk, J. 6,798.00 8 8 8 8 8 17.80 47.00
Myre, G. 9,589.00 8 8 8 8 5 8 19.25 77.00
Segel, T. 6,585.00 6 8 8 8 8 8 17.95 71.00
Torgel, I. 7,501.00 8 8 8 8 8 18.70 51.00
Taxable earnings for Social Security are based on the first $113,700. Taxable earnings for Medicare are
based on all earnings. Taxable earnings for federal and state unemployment are based on the first $7,000.
Employees are paid time-and-a-half for work in excess of 40 hours per week.
Instructions:
1. Complete the payroll register. The Social Security tax rate is 6.2 percent, and the Medicare
tax rate is 1.45 percent. Begin payroll checks with No. 2944.
2. Prepare a general journal entry to record the payroll on June 27. The firm's general ledger
contains a Wages Expense account and a Wages Payable account.
3. Assuming that the firm has transferred funds from its regular bank account to its special
payroll bank account, and that this entry has been made, prepare a general journal entry to
record the payment of wages on June 27.
ANS:
Earnings
Beginning Ending
Grant, L. 40 7,536.00 720.00 0.00 720.00 8,256.00 0.00
Hamm, R. 40 6,496.00 724.00 0.00 724.00 7,220.00 504.00
Lisk, J. 40 6,798.00 712.00 0.00 712.00 7,510.00 202.00
Myre, G. 45 9,589.00 770.00 144.38 914.38 10,503.38 0.00
Segel, T. 46 6,585.00 718.00 161.55 879.55 7,464.55 415.00
Torgel, I. 40 7,501.00 748.00 0.00 748.00 8,249.00 0.00
44,505.00 4,392.00 305.93 4,697.93 49,202.93 1,121.00
Alpine Homes
Payroll Register for Week Ended June 27, 20⎯

720.00 720.00 55.00 11.00 44.64 10.44 598.92 2944
121.08
724.00 724.00 56.00 11.20 44.89 10.50 601.41 2945
122.59
712.00 712.00 55.00 11.00 44.14 10.32 591.53 2946
120.47
914.38 914.38 85.00 17.00 56.69 13.26 742.43 2947
171.95
879.55 879.55 79.00 15.80 54.53 12.75 717.46 2948
162.09
748.00 748.00 59.00 11.80 46.38 10.85 619.98 2949
128.02
4,697.93 4,697.93
GENERAL JOURNAL PAGE

Post.
Date Description Ref. Debit Credit
20⎯
June 27 Wages Expense 4,697.93
Employees' Federal Income Tax Payable 389.00
FICA Taxes Payable 359.39
Employees' State Income Tax Payable 77.80
Wages Payable 3,871.74
27 Wages Payable 3,871.74

Cash⎯Payroll Bank Account 3,871.74
PTS: 1 DIF: Difficulty: Challenging

OBJ: LO: 7-2 | LO: 7-3 | LO: 7-4 | LO: 7-5 NAT: AACSB: Analytic
105. T. Powell, an employee of Daisy’s Day Care, worked 48 hours during the week of August 29. Her rate of
pay is $21.50 per hour, and she receives time-and-a-half for work in excess of 40 hours per week. T.
Powell is single and claims zero allowances on her W-4 form. Her YTD earnings before this pay period
are $34,850 with wages subject to the following deductions:
a.) Federal income tax, $190.
b.) Social Security tax at 6.2 percent, with a wage limit of $113,700.
c.) Medicare tax at 1.45 percent.
d.) Medical insurance premium (after tax), $80.
e.) United Way contribution. $55.
Instructions:
1. Compute T. Powell’s regular pay, gross pay, and net pay.
2. Record this pay information in T. Powell’s employee earnings record, using check
number 152.
ANS:
1.)
40 x 21.50 = $860 (regular)
8 x 32.25 = 258
$1,118 (gross)
FIT 190
SS 69.32
Medicare 16.21
Medical Insurance 80.00
United Way 50.00
$712.47 (net)
2.)
EMPLOYEE’S INDIVIDUAL EARNING RECORD
NAME T. Powell
ADDRESS EMPLOYEE
NO.
SOC. SEC.
NO.
MALE FEMALE  PAY RATE
MARRIED SINGLE  OVERTIME
PAY
PHONE BATE OF
NO. BIRTH
HOURS WORKED EARNINGS DEDUCTIONS
PERIOD DATE REGULAR OVERTIME REGULAR OVERTIME TOTAL END FEDERAL
ENDED PAID CUMULATIVE INCOME TAX
EARNINGS
Aug. 29 Aug. 30 40 8 860.00 258.00 1,118.00 34,850.00 190.00
DATE
EMPLOYED
NO. OF 0
EXEMPTIONS
PER HOUR $21.50 PER DAY
PER WEEK PER MONTH
DEDUCTIONS PAID
STATE SOCIAL MEDICARE OTHER TOTAL NET AMOUNT CK. NO.
INCOME TAX SECURITY TAX
TAX
69.32 16.21 130.00 405.53 712.47 152
PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 7-2 | LO: 7-3 | LO: 7-6
NAT: AACSB: Analytic
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College Accounting A Career Approach

12th Edition Scott Test Bank

2. Types of compensation that an employee might receive include

6. An employer may withhold portions of an employee's total earnings for

9. The employer records the amount of federal income tax withheld as

13. All of the following are optional deductions except

14. The portion of FICA taxes designated as Medicare is paid by

15. Types of deductions from employees' earnings include

17. In a payroll entry, a credit to Accounts Receivable indicates that

19. Net pay is equal to

23. The employee's individual earnings record includes

24. The Fair Labor Standards Act of 1938 provides for

26. The 941 employer’s tax payment to the IRS consists of

28. Which of the following payroll taxes is the employee’s responsibility

35. What are the two parts of FICA taxes

38. A law that regulates overtime earnings is called:

39. Employees may be paid hourly or salary based on the following:

43. Net pay is the same as

47. Which of the following would NOT be an employee payroll deduction?

51. The payroll register contains all of the following except:

57. Pre-tax deductions mean

59. Totals for payroll journal entries are obtained from:

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Moderate

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Easy

77. The Medicare tax is 6.2 percent of unlimited gross earnings.

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Easy

Match the terms below with the correct definitions.

89. ANS: D PTS: 1 DIF: Difficulty: Easy

99. Compare and contrast an employee and an independent contractor.

PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 7-1

PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 7-2 | LO: 7-3

PTS: 1 DIF: Difficulty: Challenging OBJ: LO: 7-3 | LO: 7-4

PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 7-4 | LO: 7-6

Taxable Earnings Deductions Payments

Taxable Earnings Deductions Payments

GENERAL JOURNAL PAGE

PTS: 1 DIF: Difficulty: Moderate OBJ: LO: 7-4