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Payroll Accounting (Practice Quiz)

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Author:
Harold Averkamp, CPA, MBA

For multiple-choice and true/false questions, simply press or click on what you think is the correct answer. For fill-in-the-blank questions, press or click on the blank space provided.

If you have difficulty answering the following questions, learn more about this topic by reading our Payroll Accounting (Explanation).


1.
The combination of the Social Security tax and the Medicare tax is referred to by the acronym __________ FICA (FICA is the acronym for Federal Insurance Contribution Act.).
2.
The 2025 rate for the Social Security tax (excluding the Medicare tax) that is withheld from employees' salaries and wages up to a specified annual amount is __________ 6.2%%.
3.
The combined rate for the Social Security tax and the Medicare tax to be withheld from each employee's gross wages up to $176,100 in 2025 is __________ 7.65% (6.2% + 1.45%)%.
4.
The amount of FICA that should be withheld from an employee’s salary of $180,000 in the year 2025 is $__________ $13,528.20
Social Security tax of $10,918.20 (6.2% X $176,100)
PLUS
Medicare tax of $2,610 (1.45% X $180,000).
5.
What is the total amount of FICA that needs to be remitted by an employer in 2025 for an employee earning $50,000?

$1,450

Wrong.

$3,825

Wrong.

$6,200

Wrong.

$7,650

Right!
$3,825 of employee withholding ($50,000 X 0.0765)
PLUS
$3,825 of employer portion ($50,000 X 0.0765)
EQUALS
a total of $7,650
6.
The pay earned by hourly-paid employees is usually referred to as __________ wages.
7.
The pay earned by managers who are paid semi-monthly is referred to as __________ salary or salaries.
8.
Which employee payroll classification will likely require an accrual adjusting entry for the gross salaries or wages at the end of a calendar month?

Exempt Salaried Employees Paid Semi-monthly

Wrong.
Exempt salaried employees are often paid for their work right up to payday. Hence, no need to accrue any salaries.

Hourly Employees Paid Weekly

Right!
Hourly-paid employees have their paydays approximately one week after their workweeks end and generally the workweeks do not end on the last day of the calendar month.
9.
The federal form on which an employee indicates the number of allowances to be used by the employer when calculating the federal income tax withholding is the __________ W-4 form.
10.
An example of a court-ordered employee withholding is __________ garnishment or child support.
11.
The amount that an employee "clears" or "takes home" is the __________ net pay.
12.
A tax paid by the employer that is 0.6% (net of credits) of each employee's first $7,000 of annual salary or wages is the federal __________ unemployment tax.
13.
A cost paid by the employer to cover an employee’s work-related injury is __________ worker compensation insurance.
14.
An employee is hired at a pay rate of $10 per hour. During the past week, the employee worked 50 hours. The employee’s gross wages for the past week are __________.

$400

Wrong.
Try another answer.

$450

Wrong.
Try another answer.

$500

Wrong.
Try another answer.

$550

Right!
[40 hours X $10] plus [10 hours X $15] = $550
OR
[50 hours X $10] plus [10 hours X $5] = $550

Use the following information for Questions 15 – 17:
An employee worked the entire year of 2024 and earned two weeks of vacation as specified in the company’s labor agreement. The agreement also states that the two weeks of vacation shall be taken any time in 2025 and the amount paid will be 80 hours multiplied by the employee’s rate of pay at December 31, 2024. At December 31, 2024 the employee’s pay rate was $15. Assume that the company uses the accrual method of accounting.

15.
Which financial statements are affected in the year 2024?

Balance Sheet Only

Wrong.
Try another answer.

Income Statement Only

Wrong.
Try another answer.

Balance Sheet & Income Statement

Right!
The entry to record vacations earned in 2024 will affect Vacation Expense on the 2024 income statement and Vacation Payable, a liability on the 2024 balance sheet.

Neither The Balance Sheet Nor The Income Statement

Wrong.
Try another answer.
16.
The amount that will be reported on the 2025 income statement as Vacation Expense for the vacation taken in 2025 is $__________ $0. The cost of the vacation pay will be an expense on the 2024 income statement..
17.
When the employer pays the employee in 2025 for the vacation earned in 2024, what account will the company debit?

Cash

Wrong.
This account would be credited for the amount paid.

Vacation Expense

Wrong.

Vacation Payable

Right!
18.
In January 2025 an employer remits the state unemployment tax that pertains to its employees' wages for the final three months of 2024. On which income statement will the state unemployment tax expense appear under accrual accounting?

2024

Right!

2025

Wrong.

Use the following information for Questions 19 – 20:
An employer has computed the following amounts for its employee Mary during a week in January: gross wages $500.00; FICA tax withheld $38.25; federal income tax withholding $67.25; State income tax withholding $20.00; unemployment taxes $24.00; worker compensation insurance $5.00. The company does not provide health insurance, paid vacations, or any other benefits.

19.
What is the amount of Mary’s net pay?

$352.75

Wrong.
Try another answer.

$357.75

Wrong.
Try another answer.

$374.50

Right!
Gross wages of $500.00 less withholdings of $38.25 for FICA and $87.25 for federal and state income taxes.
20.
What is the employer’s total expense for Mary’s employment during the week?

$505.00

Wrong.
Try another answer.

$529.00

Wrong.
Try another answer.

$567.25

Right!
Gross wages of $500.00 + employer's portion of FICA $38.25 ($500.00 X employer rate of 7.65%) + unemployment tax of $24.00 + worker comp insurance of $5.00.

$605.50

Wrong.
Try another answer.
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About the Author

Harold Averkamp

For the past 52 years, Harold Averkamp (CPA, MBA) has
worked as an accounting supervisor, manager, consultant, university instructor, and innovator in teaching accounting online. He is the sole author of all the materials on AccountingCoach.com.

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