Rfm - Payroll - Part 1
Test payroll and accounting knowledge.
Questions and Answers
- 1.
The combination of the Social Security tax and the Medicare tax is often referred to by the acronym:
- A.
FUTA
- B.
FICA
- C.
SUI
- D.
FIT
Correct Answer
B. FICAExplanation
The correct answer is FICA. FICA stands for Federal Insurance Contributions Act, which is the legislation that established the Social Security tax and the Medicare tax. These taxes are deducted from employees' paychecks to fund these programs. Therefore, the combination of the Social Security tax and the Medicare tax is commonly referred to as FICA.Rate this question:
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- 2.
The employee Federal withholding taxes (FIT) must be matched by the employer.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement "The employee Federal withholding taxes (FIT) must be matched by the employer" is false. Federal withholding taxes are deducted from an employee's wages by the employer and remitted to the government. The employer is not required to match these taxes. The responsibility of the employer is to accurately calculate and withhold the appropriate amount of FIT from the employee's wages.Rate this question:
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- 3.
The amount withheld from an employee's paycheck for Federal Income tax is determined by the form:
- A.
W-2
- B.
W-3
- C.
W-4
- D.
I-9
Correct Answer
C. W-4Explanation
The correct form that determines the amount withheld from an employee's paycheck for Federal Income tax is the W-4 form. This form is filled out by the employee and provides information about their filing status, number of allowances, and any additional withholding amounts. The employer uses this information to calculate the appropriate amount to withhold from the employee's paycheck for federal taxes. The W-2 form, on the other hand, is used by employers to report wages paid to employees and the taxes withheld. The W-3 form is a summary of all W-2 forms submitted by the employer. The I-9 form is used to verify the identity and employment authorization of individuals hired for employment in the United States.Rate this question:
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- 4.
A bi-weekly employee is paid a total of paychecks per year.
- A.
18
- B.
24
- C.
26
- D.
52
Correct Answer
C. 26Explanation
A bi-weekly employee is paid every two weeks, so in a year, they would receive 26 paychecks.Rate this question:
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- 5.
The acronym SSA stands for:
- A.
State Security Agency
- B.
Social Security Administration
- C.
State Security Administration
- D.
Social Security Agency
Correct Answer
B. Social Security AdministrationExplanation
The correct answer is Social Security Administration. The acronym SSA is commonly used to refer to the Social Security Administration, which is a U.S. government agency that administers social security programs. The Social Security Administration is responsible for managing retirement, disability, and survivor benefits for millions of Americans.Rate this question:
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- 6.
Every employee must be given a W-2 and W-3 by January 31st of every year.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
The statement is incorrect. Every employer must provide their employees with a W-2 form by January 31st of every year, but there is no requirement for a W-3 form to be given to employees. The W-3 form is a transmittal form that employers use to send copies of the W-2 forms to the Social Security Administration.Rate this question:
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- 7.
Which of the following sequences of months are considered the second quarter of a payroll year?
- A.
December, January, February
- B.
January, February, March
- C.
March, April, May
- D.
April, May, June
Correct Answer
D. April, May, JuneExplanation
The second quarter of a payroll year consists of the months April, May, and June. This is because the second quarter starts in April and ends in June, according to the standard calendar.Rate this question:
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- 8.
Form W-3 is sent to .
- A.
The IRS
- B.
The SSA
- C.
The IRS & SSA
- D.
The Federal Reserve
Correct Answer
B. The SSAExplanation
Form W-3 is sent to the SSA (Social Security Administration). The purpose of Form W-3 is to summarize all the W-2 forms that an employer has issued to their employees. This form is used to report the total wages, tips, and other compensation, as well as the total Social Security and Medicare wages and taxes withheld. By sending Form W-3 to the SSA, the employer ensures that the information regarding their employees' wages and taxes is properly reported and recorded for Social Security and Medicare purposes.Rate this question:
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- 9.
When does a hourly employee receive overtime pay?
- A.
When they have more than 40 hours of paid time in a week, including paid time off.
- B.
When they physically work more than 40 hours per week.
- C.
When their manager wants them to receive overtime.
- D.
When they work more than 8 hours in a day.
Correct Answer
B. When they pHysically work more than 40 hours per week.Explanation
An hourly employee receives overtime pay when they physically work more than 40 hours per week. This means that if they work more than the standard 40 hours in a given week, they are entitled to additional compensation for the extra hours worked. It is not based on the number of hours worked in a day or the manager's preference, but specifically on the total number of hours worked in a week.Rate this question:
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- 10.
If a full time hourly employee is paid $10 per hour, what is their annual salary?
- A.
$19,200
- B.
$22,100
- C.
$18,500
- D.
$20,800
Correct Answer
D. $20,800Explanation
To calculate the annual salary of a full-time hourly employee, we need to multiply their hourly wage by the number of hours they work in a year. Assuming a standard workweek of 40 hours and 52 weeks in a year, the calculation would be: $10/hour * 40 hours/week * 52 weeks/year = $20,800. Therefore, the correct answer is $20,800.Rate this question:
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- 11.
If a salaried employee makes $31,200 per year, what is their hourly rate equivalent?
- A.
$15.00/hr
- B.
$16.25/hr
- C.
$13.00/hr
- D.
$14.75/hr
Correct Answer
A. $15.00/hr -
- 12.
A full-time hourly employee has a pay rate of $10.00/hr. If they work 50 hours in a week, what is their gross pay for that week?
- A.
$500.00
- B.
$550.00
- C.
$400.00
- D.
$450.00
Correct Answer
B. $550.00Explanation
The full-time hourly employee has a pay rate of $10.00/hr. If they work 50 hours in a week, their total earnings would be $10.00 x 50 = $500.00. However, in addition to their regular pay, they may also be entitled to overtime pay if they work more than 40 hours in a week. Assuming overtime pay is calculated at 1.5 times the regular pay rate, the employee would receive an additional $10.00 x 1.5 x (50-40) = $75.00. Therefore, their gross pay for the week would be $500.00 + $75.00 = $575.00. Since none of the given options match this amount, the correct answer would be the closest option, which is $550.00.Rate this question:
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- 13.
An hourly employee who currently makes $10.00/hr receives a 5% pay raise. What is their new hourly rate?
- A.
$10.05/hr
- B.
$10.50/hr
- C.
$15.00/hr
- D.
$11.00/hr
Correct Answer
B. $10.50/hrExplanation
The correct answer is $10.50/hr. When the hourly employee receives a 5% pay raise, their new hourly rate is calculated by multiplying their current rate ($10.00/hr) by 1.05. This gives us $10.50/hr, which is the new hourly rate after the pay raise.Rate this question:
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- 14.
Supplemental wages paid to employees, such as bonuses and commissions, are not taxable.
- A.
True
- B.
False
Correct Answer
B. FalseExplanation
Supplemental wages paid to employees, such as bonuses and commissions, are taxable. These wages are considered additional income and are subject to federal income tax withholding. The employer is required to include the supplemental wages in the employee's gross income for tax purposes. The employee will receive a Form W-2 at the end of the year, which will reflect the total amount of supplemental wages received and the taxes withheld. Therefore, the statement that supplemental wages are not taxable is incorrect.Rate this question:
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- 15.
Sam is one of our clients' employees. On payday, his wife calls our office and asks what his net pay was so she can balance her checkbook. Is it ok to tell his wife what he made?
- A.
Yes
- B.
No
Correct Answer
B. NoExplanation
It is not okay to tell Sam's wife what he made because it is a violation of privacy and confidentiality. As an employee, Sam has a right to keep his financial information private, and it is not appropriate for the employer to disclose his net pay to anyone without his consent.Rate this question:
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- 16.
What is the per pay period gross earnings for a semi-monthly employee who earns $100,000 a year?
- A.
$2,166.67
- B.
$1,923.08
- C.
$4,166.67
- D.
$3,846.16
Correct Answer
C. $4,166.67Explanation
The correct answer is $4,166.67. A semi-monthly employee is paid twice a month, so to calculate the per pay period gross earnings, we divide the annual salary by the number of pay periods in a year. In this case, $100,000 divided by 24 (12 pay periods in a year for a semi-monthly employee) equals $4,166.67.Rate this question:
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- 17.
What is the overtime rate for an employee who makes $50,000 a year?
- A.
$36.06
- B.
$46.88
- C.
$56.06
Correct Answer
A. $36.06Explanation
The overtime rate for an employee who makes $50,000 a year is $36.06. This can be calculated by dividing the annual salary by the number of working hours in a year, and then multiplying that by the overtime rate.Rate this question:
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- 18.
Can a payee have more than one direct deposit account?
- A.
Yes
- B.
No
Correct Answer
A. YesExplanation
Yes, a payee can have more than one direct deposit account. This means that they can choose to have their income deposited into multiple bank accounts simultaneously. This could be helpful for individuals who want to allocate their funds for different purposes or have multiple accounts for different financial goals. It provides flexibility and convenience for managing their finances.Rate this question:
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- 19.
Which of the following accounts has a normal debit balance?
- A.
Liability
- B.
Revenue
- C.
Equity
- D.
Expense
Correct Answer
D. ExpenseExplanation
The correct answer is Expense. Expense accounts are types of accounts that track the costs incurred by a business in order to generate revenue. These accounts have a normal debit balance because they represent decreases in the company's assets or increases in its liabilities. When an expense is incurred, it is recorded as a debit entry in the expense account, which increases the expense balance. This is consistent with the concept of debits representing increases in expenses and credits representing decreases.Rate this question:
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- 20.
Which of the following accounts has a normal credit balance?
- A.
Asset
- B.
Liability
- C.
Expense
- D.
Cash
Correct Answer
B. LiabilityExplanation
Liability accounts have a normal credit balance. This means that when there is an increase in a liability, it is recorded as a credit entry, and when there is a decrease, it is recorded as a debit entry. Liabilities represent the obligations or debts that a company owes to external parties, such as loans, accounts payable, or accrued expenses. These accounts show the company's financial obligations and are typically reported on the balance sheet.Rate this question:
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- 21.
Under which of the following situations may an employee change an election made under a 125 cafeteria plan within the plan year?
- A.
Employee receives a salary increase
- B.
Employee divorces
- C.
Employee is demoted
- D.
Employee transfers to another department
Correct Answer
B. Employee divorcesExplanation
An employee may change an election made under a 125 cafeteria plan within the plan year if they experience a significant life event, such as a divorce. Divorce often leads to changes in financial circumstances and healthcare needs, which may require the employee to adjust their benefits choices. Therefore, it is reasonable for an employee to be allowed to change their cafeteria plan election during a plan year after a divorce.Rate this question:
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- 22.
Which of the following generally is excluded when computing the workers' compensation insurance premium?
- A.
Vacation
- B.
Bonuses
- C.
Premium overtime pay
- D.
Shift pay
Correct Answer
C. Premium overtime payExplanation
Premium overtime pay is generally excluded when computing the workers' compensation insurance premium. This is because workers' compensation insurance is typically based on the regular wages of employees, rather than any additional compensation such as overtime pay. The purpose of workers' compensation insurance is to provide coverage for work-related injuries or illnesses, and overtime pay is not considered a regular part of an employee's wages. Therefore, it is not factored into the calculation of the insurance premium.Rate this question:
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- 23.
Which of the following would NOT be an asset account?
- A.
Cash
- B.
Wages payable
- C.
Employee receivables
- D.
Prepaid expenses
Correct Answer
B. Wages payableExplanation
Wages payable would not be an asset account because it represents a liability, not an asset. It is the amount of wages that a company owes to its employees but has not yet paid. Asset accounts, on the other hand, represent resources that a company owns and can include cash, employee receivables, and prepaid expenses.Rate this question:
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- 24.
Procedures governing employers' payment of wages by direct deposit are governed by:
- A.
IRS
- B.
NACHA
- C.
SSA
- D.
INS
Correct Answer
B. NACHAExplanation
NACHA, also known as the National Automated Clearing House Association, is an organization that establishes rules and standards for the electronic transfer of funds, including direct deposits. They provide guidelines and regulations for employers to follow when implementing direct deposit payment systems for their employees. Therefore, NACHA is the correct answer as it governs the procedures for employers' payment of wages by direct deposit.Rate this question:
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- 25.
Under the Immigration Reform and Control Act, employers and employees are required to complete which of the following forms:
- A.
SS-5
- B.
W-4
- C.
I-9
- D.
W-2
Correct Answer
C. I-9Explanation
Under the Immigration Reform and Control Act, employers and employees are required to complete the I-9 form. This form is used to verify the identity and employment eligibility of individuals hired for employment in the United States. It requires employees to provide certain documents, such as a passport or driver's license, to establish their identity and work authorization. Employers must review these documents and complete the form within a certain timeframe after hiring an employee. The purpose of the I-9 form is to ensure that employers are hiring individuals who are legally authorized to work in the country.Rate this question:
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- 26.
In the first monthly accounting period of a company's fiscal year, which of the following occurs?
- A.
All liability accounts are reset to zero balances
- B.
Unrepaid debts are "forgiven"
- C.
Asset account balances are reclassified
- D.
Asset and liability accounts reflect prior year ending balances
Correct Answer
D. Asset and liability accounts reflect prior year ending balancesExplanation
In the first monthly accounting period of a company's fiscal year, the correct answer is that asset and liability accounts reflect prior year ending balances. This means that the balances from the previous fiscal year are carried forward and reflected in the current period. It is important to start each new fiscal year with accurate and up-to-date balances in order to maintain the continuity of financial records and ensure accurate reporting. Resetting liability accounts to zero balances or forgiving unrepaid debts would not be standard practices in the first monthly accounting period. Reclassifying asset account balances may occur if there are changes in the nature or classification of certain assets, but it is not a necessary occurrence in the first monthly accounting period.Rate this question:
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- 27.
The entry to record a salary advance to an employee is:
- A.
Debit employee receivable, credit cash
- B.
Debit wages expense, credit cash
- C.
Debit wages expense, credit wages payable
- D.
Debit cash, credit employee receivable
Correct Answer
A. Debit employee receivable, credit cashExplanation
The correct answer is to debit employee receivable and credit cash. This entry is made to record a salary advance given to an employee. By debiting the employee receivable account, we are increasing the amount owed by the employee, while crediting the cash account shows a decrease in the company's cash balance as the advance is paid out.Rate this question:
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- 28.
The entry to record the wage expense (gross pay) for payroll would include a debit/credit to the following account:
- A.
Debit - Wage Expense
- B.
Debit - Wages Payable
- C.
Credit - Wage Expense
- D.
Credit - Wages Payable
Correct Answer
A. Debit - Wage ExpenseExplanation
The correct answer is Debit - Wage Expense. When recording the wage expense for payroll, it is necessary to debit the Wage Expense account. This is because wage expense represents the cost incurred by the company for employee wages. By debiting the Wage Expense account, the company is recognizing the expense and reducing its net income. This entry will be balanced by a credit to another account, such as Cash or Wages Payable, depending on whether the wages have been paid or are still owed to the employees.Rate this question:
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- 29.
The entry to record the employers payroll tax expense would include a debit/credit to the following account:
- A.
Debit - Payroll Tax Liability
- B.
Debit - Payroll Tax Expense
- C.
Credit - Payroll Tax Liability
- D.
Credit - Payroll Tax Expense
Correct Answer
B. Debit - Payroll Tax ExpenseExplanation
The correct answer is Debit - Payroll Tax Expense. This is because when recording the employers payroll tax expense, it is necessary to debit the Payroll Tax Expense account to increase the expense. The other options, including debiting and crediting the Payroll Tax Liability account, are not appropriate in this case as they do not reflect the expense incurred by the employer.Rate this question:
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- 30.
The entry to record net pay would include a debit/credit to the following account:
- A.
Debit - Cash
- B.
Credit - Cash
- C.
Debit - Wage Expense
- D.
Credit - Wage Expense
Correct Answer
B. Credit - CashExplanation
The correct answer is Credit - Cash. This is because net pay represents the amount of money that is paid to employees after deductions such as taxes and benefits have been taken out. When recording net pay, a credit entry is made to the Cash account to reflect the decrease in the company's cash balance.Rate this question:
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- 31.
The entry to record the payroll tax liability for payroll would include a debit/credit to the following account:
- A.
Debit - Payroll Tax Liability
- B.
Debit - Payroll Tax Expense
- C.
Credit - Payroll Tax Liability
- D.
Credit - Payroll Tax Expense
Correct Answer
C. Credit - Payroll Tax LiabilityExplanation
The correct answer is Credit - Payroll Tax Liability. When recording the payroll tax liability for payroll, a credit is made to the Payroll Tax Liability account. This is because the company owes this amount in taxes to the government. Debiting Payroll Tax Liability or Payroll Tax Expense would be incorrect as it would not accurately reflect the company's liability for payroll taxes.Rate this question:
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- 32.
The entry to record health insurance withholding would include a debit/credit to the following account:
- A.
Debit - Health Insurance Payable
- B.
Credit - Health Insurance Payable
- C.
Debit - Health Insurance Expense
- D.
Credit - Health Insurance Expense
Correct Answer
D. Credit - Health Insurance ExpenseExplanation
The correct answer is Credit - Health Insurance Expense. This entry is made to record the expense incurred for health insurance. By crediting the Health Insurance Expense account, we are decreasing the balance of this expense account, which is a normal credit balance account. This entry reflects the amount that the company owes for health insurance coverage.Rate this question:
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- 33.
Under NACHA rules, employers are advised to retain a copy of the employee's written authorization for direct deposit for at least from the date it was last deposited to.
- A.
4 years
- B.
2 years
- C.
3 years
- D.
1 year
Correct Answer
B. 2 yearsExplanation
Under NACHA rules, employers are advised to retain a copy of the employee's written authorization for direct deposit for at least 2 years from the date it was last deposited. This is important for record-keeping purposes and to ensure compliance with regulations. By retaining the authorization for this period, employers can easily access and provide proof of the employee's consent if needed. Additionally, this timeframe allows for any potential disputes or inquiries that may arise within a reasonable time frame.Rate this question:
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- 34.
With regard to employee's reported tips, the employer must:
- A.
Withhold and pay only the employees' portion of social security and medicare taxes on tips.
- B.
Report taxes on tips separately when making an employment tax deposit
- C.
Report tips as wages on Form W-2 and pay the employer portions of social security and medicare taxes
- D.
Report and pay the employer portion of social security and medicare taxes on the portion of cash tips above the federal minimum wage.
Correct Answer
C. Report tips as wages on Form W-2 and pay the employer portions of social security and medicare taxesExplanation
The correct answer is to report tips as wages on Form W-2 and pay the employer portions of social security and medicare taxes. This means that the employer is responsible for reporting the tips as part of the employee's wages on their Form W-2, and also paying the employer's portion of social security and medicare taxes on those tips. This ensures that the employer is fulfilling their tax obligations and accurately reporting the employee's income.Rate this question:
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- 35.
Under FLSA, what is the compensation due an employee whose rate of pay is $8 per hour and who is paid for 52 hours during a one-week period, including 8 hours of sick pay?
- A.
$416
- B.
$432
- C.
$448
- D.
$464
Correct Answer
B. $432Explanation
The employee's rate of pay is $8 per hour, and they worked 52 hours in a one-week period. This means their regular pay for the 52 hours is 52 * $8 = $416. Additionally, they received 8 hours of sick pay, which is also paid at their regular rate of $8 per hour. So, the total compensation due to the employee is $416 + $64 (8 * $8) = $480. However, since the question asks for the compensation due under FLSA, we need to consider overtime. Under FLSA, any hours worked over 40 in a week are subject to overtime pay of 1.5 times the regular rate. In this case, the employee worked 52 hours, so 12 of those hours are overtime. Therefore, the overtime pay is 12 * $8 * 1.5 = $144. Subtracting the overtime pay from the total compensation gives us $480 - $144 = $336. However, since the question only provides answer choices in multiples of $16, the closest option is $432.Rate this question:
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- 36.
Employee deferrals under section 401(k) are subject to which taxes?
- A.
FIT and FICA-SS and FICA-MED
- B.
FICA-SS and FICA-MED
- C.
FICA-SS and FICA-MED and FUTA
- D.
FIT and FICA-SS and FICA-MED and FUTA
Correct Answer
C. FICA-SS and FICA-MED and FUTAExplanation
Employee deferrals under section 401(k) are subject to FICA-SS (Federal Insurance Contributions Act - Social Security), FICA-MED (Federal Insurance Contributions Act - Medicare), and FUTA (Federal Unemployment Tax Act) taxes. FICA-SS and FICA-MED are payroll taxes that fund Social Security and Medicare programs, while FUTA is a tax that funds unemployment benefits. These taxes are deducted from the employee's wages and paid by the employer.Rate this question:
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- 37.
What does it mean if, at the end of an accounting period, a company has a debit balance in a liability account?
- A.
The company has under-deposited taxes withheld from employee wages
- B.
The company has not yet paid the third party
- C.
The company has withheld too much from the employee
- D.
The company has paid a third party more than was withheld from the employee
Correct Answer
D. The company has paid a third party more than was withheld from the employeeExplanation
If a company has a debit balance in a liability account at the end of an accounting period, it means that the company has paid a third party more than was withheld from the employee. This suggests that the company has overpaid its liabilities and owes more to the third party than it has collected from its employees.Rate this question:
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- 38.
How often are Form 940 taxable wages reported?
- A.
Annually
- B.
Semi-annually
- C.
Quarterly
- D.
Monthly
Correct Answer
A. AnnuallyExplanation
Form 940 is a tax form used by employers to report their annual Federal Unemployment Tax Act (FUTA) tax liability. FUTA tax is based on taxable wages paid to employees during the year. Therefore, the taxable wages reported on Form 940 are reported annually. This means that employers need to calculate and report their FUTA tax liability on a yearly basis.Rate this question:
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- 39.
On a company's financial statements, payroll tax expense appears in the:
- A.
Balance sheet
- B.
State of retained earnings
- C.
Income statement
- D.
Statement of cash flows
Correct Answer
C. Income statementExplanation
Payroll tax expense appears in the income statement because it represents the taxes that the company has to pay on its employees' wages and salaries. This expense is typically included as part of the operating expenses section of the income statement, which shows the costs incurred in generating revenue during a specific period. By including payroll tax expense in the income statement, the company can accurately calculate its net income or loss for the period.Rate this question:
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- 40.
The employer must withhold FICA and FIT and pay FUTA tax, when the employee's tips exceed what amount?
- A.
$50 per month
- B.
$20 per year
- C.
$20 per month
- D.
$50 per year
Correct Answer
C. $20 per monthExplanation
The employer must withhold FICA (Federal Insurance Contributions Act) and FIT (Federal Income Tax) and pay FUTA (Federal Unemployment Tax Act) tax when the employee's tips exceed $20 per month. This means that if the employee earns more than $20 in tips in a given month, the employer is responsible for withholding the appropriate taxes and paying the FUTA tax on those tips.Rate this question:
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- 41.
If an employee fails to furnish the employer with a form W-4, the employer is required to withhold federal income tax at the rate of:
- A.
Married and 0 allowances
- B.
Single and 1 allowance
- C.
Single and 0 allowances
- D.
Married and 2 allowances
Correct Answer
C. Single and 0 allowancesExplanation
If an employee fails to furnish the employer with a form W-4, the employer is required to withhold federal income tax at the rate of Single and 0 allowances. This means that the employer will withhold taxes from the employee's paycheck as if they were single and claiming zero allowances. This is the default withholding status when an employee does not provide a completed W-4 form, as it ensures that the maximum amount of taxes are withheld from the employee's wages.Rate this question:
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Mar 21, 2023Quiz Edited by
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Feb 26, 2015Quiz Created by
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