Payroll Accounting (Practice Quiz)

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


  1. 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. 2. The 2023 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. 3. The combined rate for the Social Security tax and the Medicare tax to be withheld from each employee's gross wages up to $160,200 in 2023 is
    __________
    7.65% (6.2% + 1.45%)
    %.
  4. 4. The amount of FICA that should be withheld from an employee’s salary of $180,000 in the year 2023 is $
    __________
    $12,542.40
    Social Security tax of $9,932.40 (6.2% X $160,200)
    PLUS
    Medicare tax of $2,610 (1.45% X $180,000)
    .
  5. 5.

    What is the total amount of FICA that needs to be remitted by an employer in 2023 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. 6. The pay earned by hourly-paid employees is usually referred to as
    __________
    wages
    .
  7. 7. The pay earned by managers who are paid semi-monthly is referred to as
    __________
    salary or salaries
    .
  8. 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 and generally the workweek does not end on the last calendar day of the month.
  9. 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. 10. An example of a court-ordered employee withholding is
    __________
    garnishment or child support
    .
  11. 11. The amount that an employee "clears" or "takes home" is the
    __________
    net
    pay.
  12. 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
    __________
    federal unemployment
    tax.
  13. 13. A cost paid by the employer to cover an employee’s work-related injury is
    __________
    worker compensation
    insurance.
  14. 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

  15. Use the following information for Questions 15 - 17:
    An employee worked the entire year of 2022 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 2023 and the amount paid will be 80 hours multiplied by the employee's rate of pay at December 31, 2022. At December 31, 2022 the employee's pay rate was $15. Assume that the company uses the accrual method of accounting.

  16. 15.

    Which financial statements are affected in the year 2022?

    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 2022 will affect Vacation Expense on the 2022 income statement and Vacation Payable, a liability on the 2022 balance sheet.
    Neither The Balance Sheet Nor The Income Statement
    Wrong.
    Try another answer.
  17. 16. The amount that will be reported on the 2023 income statement as Vacation Expense for the vacation taken in 2023 is $
    __________
    $0. The cost of the vacation pay will be an expense on the 2022 income statement.
    .
  18. 17.

    When the employer pays the employee in 2023 for the vacation earned in 2022, what account will the company debit?

    Cash
    Wrong.
    This account would be credited for the amount paid.
    Vacation Expense
    Wrong.
    Vacation Payable
    Right!
  19. 18.

    In January 2023 an employer remits the state unemployment tax that pertains to its employees' wages for the final three months of 2022. On which income statement will the state unemployment tax expense appear under accrual accounting?

    2022
    Right!
    2023
    Wrong.

  20. 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.

  21. 19.

    The amount of Mary’s net pay is

    $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.
  22. 20.

    The employer’s total expense for Mary’s employment during the week is

    $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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