Chapter 5 quiz - employee net pay and pay methods, compute social security and medicare tax withholding PDF

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employee net pay and pay methods, compute social security and medicare tax withholding...

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Chapter 5 quiz 1. Computation of net pay involves deducting mandatory and voluntary deductions from gross pay. True 2. Federal income tax, Medicare tax, and Social Security tax amounts withheld from employee pay are computed based on gross pay, less pre-tax deductions, and deducted to arrive at net pay. True 3. The amount of federal income tax decreases as the number of allowances increases. True 4. The wage-bracket of determining federal tax withholding yields more accurate amounts than the percentage method. False 5. Social Security tax has a wage base, which is the minimum amount an employee must earn before they will have the Social Security tax deduction. False 6. The regular Medicare tax deduction is 1.45% for employee and employer and must be paid by all employees.True 7. A firm has headquarters in Indiana but has offices in California and Utah. For employee taxation purposes, it may choose which of those three states income tax laws it wishes to use. False 8. Garnishments are court-ordered amounts that an employer must withhold from an employee's pre-tax pay and remit to the appropriate authority. False 9. Charitable contributions are an example of post-tax voluntary deductions. True 10. The use of paycards as a means of transmitting employee pay began in the 1990s with overthe-road drivers out of a need to transmit funds reliably on payday. True 11. Which are steps in the net pay computation process? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes lef with a Question mark will be automatically graded as incorrect.) A) Compute taxes to be withheld. B) Report fringe benefit balances. C) Compute gross pay. D) Update employee records. 12. Which payroll-specific tool is used to facilitate computation of net pay? A) Payroll Register B) Form I-9 C) Employee Information Form D) Supervisor Payroll Report 13. How are income taxes and FICA taxes applied to gross-up pay? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes lef With a question mark will be automatically graded as incorrect.) A) Subtract the sum of the income tax rate and FICA tax rate from 100 percent. B) Compute the sum of the income tax and FICA tax rates. C) Divide the net pay by the net tax rate.

Chapter 5 quiz D) Multiply the gross pay by the sum of the income tax and FICA tax rates. 14. Which of the following federal withholding allowance scenarios will have the highest income tax? A) Single, 5 allowances B) Married, 0 allowances C) Married, 3 allowances D) Single, 1 allowance 15. Which of the following statements is/are true about Social Security tax deductions from gross pay? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box For a wrong answer. Any boxes lef with a question mark will be automatically graded as incorrect.) A) The wage base is $132,900. B) The tax is computed on all earnings. C) The tax rate is 6.0%. D) Section 125 deductions are not subject to Social Security tax. 16. Which of the following states do not have state income tax deducted from employee pay? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a Wrong answer. Any boxes lef with a question mark will be automatically graded as incorrect.) A) Montana B) New Hampshire C) Maine D) Alaska 17. Which of the following is used in the determination of the amount of federal income tax to be withheld from an employee per pay period? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with The question mark to empty the box for a wrong answer. Any boxes lef with a question mark will be automatically graded as incorrect.) A) Date of birth B) Period salary C) Marital status D) Prior year's tax return

Chapter 5 quiz 18. Which of the following statements is/are true about Medicare tax? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes Lef with a question mark will be automatically graded as incorrect.) A) Additional Medicare tax is withheld for employees who earn more than $150,000 annually. B) Employers match all Medicare taxes withheld. C) The Medicare tax rate is 1.45%. D) All employee earnings less pre-tax deductions are subject to Medicare tax. 19. What role does the employer play regarding an employee's federal withholding tax? A) Collector and verifier B) Verifier and reporter C) Collector and depositor D) Reporter and depositor 20. Amity is an employee with a period gross pay of $2,000. She elects to have 3% of her gross pay withheld for her 401(k) contribution. What will be her taxable income be for federal income taxes? A) $1,970 B) $1,940 C) $2,000 D) $1,910 21. Trish earned $1,734.90 during the most recent semimonthly pay period. She is married and has 3 withholding allowances and has no pre-tax deductions. Based on the following table, how much should be withheld from her gross pay for Federal income tax? A) $72.00 B) $93.00 C) $76.00 D) $95.00 22. Caroljane earned $1,120 during the most recent pay biweekly pay period. She contributes 4% of her gross pay to her 401(k) plan. She is single and has 1 withholding allowance. Based on the following table, how much Federal income tax should be withheld from her pay? A) $106.00

Chapter 5 quiz B) $104.00 C) $87.00 D) $85.00 23. Andie earned $680.20 during the most recent weekly pay period. She is single with 3 withholding allowances and needs to decide between contributing 2.5% and $25 to her 401(k) plan. If she chooses the method that results in the lowest taxable income, how much will be withheld for Federal income tax (based on A) $40.00 B) $48.00 C) $36.00 D) $39.00 24. Olga earned $1,558.00 during the most recent weekly pay period. She is single with 2 withholding allowances and no pre-tax deductions. Using the percentage method, compute Olga's federal income tax for the period. (Do not round intermediate calculations. Round final answer to 2 decimal places.) A) $239.25 B) $211.51 C) $214.75 D) $217.93 25. Warren is a married employee with six withholding allowances. During the most recent biweekly pay period, he earned $9,450.00. Using the percentage method, compute Warren's federal income tax. (Do not round intermediate calculations. Round your final answer to 2 decimal places.) A) $1,490.15 B) $1,512.91 C) $1,456.90 D) $1,478.42 26. Adam is a part-time employee who earned $495.00 during the most recent pay period. He is married with two withholding allowances. Prior to this pay period, his year-to-date pay is $6,492.39. How much should be withheld from Adam's gross pay for Social Security tax? A) $30.69

Chapter 5 quiz B) $28.46 C) $40.02 D) $37.92 27. Jeannie is an adjunct faculty at a local college, where she earned $680.00 during the most recent semimonthly pay period. Her prior year-to-date pay is $18,540. She is single and has one withholding allowance. What is her Social Security tax for the pay period? A) $48.02 B) $39.24 C) $44.18 D) $42.16 28. Paolo is a part-time security guard for a local facility. He earned $298.50 during the most recent weekly pay period and has earned $5,296.00 year-to-date. He is married with four withholding allowances. What is his Medicare tax liability for the pay period? A) $10.54 B) $4.33 C) $43.23 D) $8.65 29. Steve is a full-time exempt employee at a local electricity co-operative. He earns an annual salary of $43,325 and is paid biweekly. What is his Social Security tax deduction for each pay period? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) A) $98.67 B) $106.34 C) $103.31 D) $123.95 30. Renee is a salaried exempt employee who earns an annual salary of $64,200, which is paid semimonthly. She is married with four withholding allowances. What is her total FICA tax liability per pay period? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) A) $38.79 B) $204.64

Chapter 5 quiz C) $165.85 D) $409.28 31. Natalia is a full-time exempt employee who earns $215,000 annually, paid monthly. Her year-todate pay as of November 30 is $197,083.33. How much will be withheld from Natalia for FICA taxes for the December 31 pay date? (Social Security maximum wage is $132,900. Do not round intermediate calculations. Round Your final answer to 2 decimal places.) A) $1,370.63 B) $292.04 C) $421.04 D) $394.79 32. Wyatt is a full-time exempt music engineer who earns $150,000 annually and is paid semimonthly. As of November 15, his year-to-date gross pay was $131,250. How much will be withheld for FICA taxes for the November 30 pay date? (Social Security maximum wage is $132,900. Do not round intermediate calculations. Round your final answer to 2 decimal places.) A) $192.93 B) $224.83 C) $264.20 D) $175.58 33. Melody is a full-time employee in Sioux City, South Dakota, who earns $3,600 per month and is paid semimonthly. She is married with 1 withholding allowance (use the wage-bracket tables). She has a qualified health insurance deduction of $50 per pay period and contributes 3% to her 401(k), both of which are pre-tax Deductions. What is her net pay? A) $1,455.13 B) $1,696.00 C) $1,524.27 D) $1,394.87 34. Julian is a part-time nonexempt employee in Nashville, Tennessee, who earns $21.50 per hour. During the last biweekly pay period he worked 45 hours, 5 of which are considered overtime. He is single with one withholding allowance (use the wage-bracket table). What is his net pay? A) $865.11

Chapter 5 quiz B) $825.99 C) $797.18 35. Disposable income is defined as: A) An employee's pay afer legally required deductions have been withheld. B) An employee's net pay less living expenses like rent and utilities. C) An employee's gross pay less Identify Pre-Tax Deductions. D) An employee's taxable income less Understand Post-Tax Deductions. 36. Sammy contributes 4% of her salary to a 401(k) plan, $50 per pay period to a charitable contribution, $140 per pay period to union dues, and $50 per pay period to a section 125 qualified insurance plan offered by her employer. Which contributions must be taken on a post-tax basis? (You may select more Than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the Question mark to empty the box for a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) A) Section 125 insurance plan B) 401(k) contribution C) Charitable contribution D) Union dues 37. Garnishments may include deductions from employee wages on a post-tax basis for items such as: (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box For a wrong answer. Any boxes left with a question mark will be automatically graded as incorrect.) A) Union Dues. B) Charitable contributions. C) Consumer Credit liens. D) Child Support payments. 38. Why might an employee elect to have additional federal income tax withheld? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong Answer. Any boxes left with a question mark will be automatically graded as incorrect.)

Chapter 5 quiz A) The employee wishes to reduce income tax liability. B) The employee has more than one job. C) The employee's spouse is employed. D) The employee wants to satisfy prior years' tax obligations. 39. Tierney is a full-time nonexempt salaried employee who earns $990 per biweekly pay period. She is single with 1 withholding allowance and both lives and works in Bowling Green, Kentucky. Assuming that she had no overtime, what is the total of her Federal and state taxes for a pay period? (Use the wage-bracket Tables. Kentucky state income rate is 5.00%. Round final answer to 2 decimal places.) A) $128.25 B) $124.50 C) $120.78 40. Brent is a full-time exempt employee in Clark County, Indiana. He earns an annual salary of $45,000 and is paid semimonthly. He is married with 3 withholding allowances. His state income tax is 3.23%, and Clark County income tax is $33.75 per pay period. What is the total of FICA, Federal, state, and local deductions Per pay period, assuming no Pre-Tax Deductions? (Use the wage-bracket table to determine Federal taxes. Do not round intermediate calculations. Round your final answer to 2 decimal places.) A) $303.36 B) $306.45 C) $318.13 D) $323.75 41. Amanda is a full-time exempt employee in Sparks, Nevada, who earns $84,000 annually. She is married with 1 deduction and is paid biweekly. She contributes $150.00 per pay period to her 401(k) and has pre-tax health insurance and AFLAC deductions of $50.00 and $75.00, respectively. Amanda contributes $25.00 Per pay period to the United Way. What is her net pay? A) $2,394.47 B) $2,193.60 C) $2,427.27 D) $2,605.44

Chapter 5 quiz 42. Danny is a full-time exempt employee in Alabama, where his state income tax rate is 5%. He earns $78,650 annually and is paid semimonthly. He is married with four withholding allowances. His is health insurance is $100.00 per pay period and is deducted on a pre-tax basis. Danny contributes 5% of his pay to his 401(k). Assuming that he has no other deductions, what is Danny's net pay for the period? (Use the percentage method for the federal income tax and the A) $2,403.94 B) $2,178.90 C) $2,245.53 D) $2,278.94 43. Collin is a full-time exempt employee in Juneau, Alaska, who earns $135,000 annually and has not yet reached the Social Security wage base. He is single with 1 withholding allowance and is paid semimonthly. He contributes 3% per pay period to his 401(k) and has pre-tax health insurance and AFLAC deductions of $150 and $25, respectively. Collin has a child support garnishment of $300 per pay period. What is his net pay? A) $3,974.60 B) $3,885.14 C) $3,619.53 D) $3,653.05 44. Which of the following is the correct sequence for computing net pay? A) Compute gross pay, deduct taxes, and add voluntary deductions. B) Compute gross pay, deduct pre-tax amounts, compute FICA, deduct taxes, and deduct post-tax amounts. C) Compute gross pay then deduct withholding and add FICA taxes to obtain net pay. D) Compute gross pay, compute FICA, deduct pre-tax amounts, and deduct taxes. 45. Maile is a full-time exempt employee in Boca Raton, Florida, who earns $1,370.15 per biweekly payday. She is married with seven withholding allowances, so her federal income tax is $0. She contributes 4% of her gross pay to her 401(k) and has her health insurance premium of $50 deducted on a pre-tax basis. She Has $10 deducted per pay period for a Salvation Army contribution and has union dues of $40 per pay period. What is her net pay? (Do not round intermediate Calculations. Round your final answer to 2 decimal places.) A) $1,137.93

Chapter 5 quiz B) $1,124.23 C) $1,160.53 D) $1,114.35 46. Jesse is a part-time nonexempt employee in Austin, Texas, who earns $12.50 per hour. During the last biweekly pay period he worked 35 hours. He is married with zero withholding allowances, which means his federal income tax deduction is $21.00, and has additional federal tax withholding of $30 per pay period. What is his net pay? (Do not round intermediate calculations. Round your final answer to 2 decimal places.) A) $354.28 B) $374.03 C) $378.03 D) $353.03 47. Which of the following is true about cash as a method of paying employees? A) Cash is readily transferable and highly liquid. B) Cash is the most secure payment method. C) Cash is the most convenient pay method for employers. D) Cash is the most widely used payment method. 48. Why do employers use checks as an employment payment method? A) Paying employees by check requires the employer to keep currency on the premises. B) Paying employees by check offers a level of security of employee payments. C) Paying employees by check allows the employer flexibility with its bank accounts. D) Paying employees by check increases the complexity of the payroll process. 49. Best practices for paying employees by check include which of the following? (You may select more than one answer. Single click the box with the question mark to produce a check mark for a correct answer and double click the box with the question mark to empty the box for a wrong Answer. Any boxes lef with a question mark will be automatically graded as incorrect.) A) Maintenance of a separate checking account for payroll purposes. B) Keeping a single check register for the firm's checking accounts.

Chapter 5 quiz C) Logging the number, amount, and purpose of each check used. D) Establishing an unclaimed property account for uncashed checks. 50. What is an advantage of direct deposit from the employee's perspective? A) Long processing times for pay disbursements. B) Secure access to compensation. C) The requirement to have a bank account. D) Access to payroll data on non-secured website. 51. From the employer's perspective, which of the following is a challenge of paying employees by direct deposit? A) Employee self-maintenance of personnel records. B) Secure processing of employee compensation. C) Reduction in payroll processing costs. D) Vulnerability of data to computer attacks. 52. Which body issued Regulation E to protect consumers from loss of deposited funds? A) Department of Homeland Security B) Internal Revenue Service C) American Banking Association D) Federal Deposit Insurance Corporation 53. What is a disadvantage to using paycards as a method of transmitting employee compensation? A) Ease of paying traveling employees. B) Convenience of retrieving pay disbursements. C) Acceptance of paycards at many locations. D) Potential withdrawal and point-of-sale limitations. 54. Which of the following payment methods is growing in popularity among employees? A) Check B) Paycard

Chapter 5 quiz C) Cash D) Direct Deposit 55. The annual payroll tax guide that the IRS distributes is called ________. A) The IRS tax guide B) Publication 15 C) Circular 15 D) Publication E 56. When a payroll check is subject to escheatment, who handles the distribution of the money? A) The IRS. B) The employee. C) The state laws. D) The company. 57. Nickels Company is located in West Virginia has employees who live in Ohio, Florida, Tennessee, and West Virginia. For which state(s) should the company collect and remit state income tax? (You may select more than one answer. Single click the box with the question mark to produce a check mark for A correct answer and double click the box with the question mark to empty the box for a wrong answer. Any boxes lef with a question mark will Be automatically graded as incorrect.) A) Florida B) Ohio C) West Virginia D) Tennessee 58. The factors that determine an employee's federal income tax are ________. A) Pay frequency, number of dependents, taxable pay, and marital status B) Marital status, birth date, taxable pay, and pay frequency C) Number of children, pay frequency, marital status, and gross pay D) Marital status, number of withholdings, taxable pay, and pay frequency 59. The percentage method of determining an employee's Federal income tax deductions ________.

Chapter 5 quiz A) allows payroll accountants to determine Federal income tax for the firm itself B) is used to promote complexity in payroll practices C) is less accurate than the results gained from using the wage-bracket method D) is used primarily for high wage earners and computerized payroll programs 60. The purpose of the wage base used for the Social Security tax is...