Chapter 12 Objective Questions
True/False
Indicate whether the statement is true or false.
____
1. The money paid for employee services is a salary.
____
2. The period covered by a salary payment is a pay period.
____
3. All businesses base their salary payments on the same length of time.
____
4. A pay period may be weekly.
____
5. The total amount earned by all employees for a pay period is a payroll.
____
6. A payroll system must include an accurate record of the time each employee has worked.
____
7. Total earnings are sometimes referred to as gross pay.
____
8. Businesses must withhold federal income tax from employee total earnings.
____
9. Payroll taxes withheld represent a liability for an employer until payment is made.
____ 10. Federal income tax is withheld from employee earnings in all but two states.
____ 11. The marital status and withholding allowances of an employee affect the amount of federal income tax
withheld.
____ 12. No employees are exempt from having federal income taxes withheld.
____ 13. Medicare is funded by the federal government but not under the social security law.
____ 14. Social security tax is a federal tax paid by employees and employers for old-age, survivors, and disability
insurance.
____ 15. A payroll ledger is a business form used to record payroll information.
____ 16. A separate checking account for payroll checks helps to protect and control payroll payments.
____ 17. A business may decide to pay employee salaries every week, every two weeks, twice a month, or once a
month.
____ 18. Payroll time cards can be used as the basic source of information to prepare a payroll.
____ 19. The first task in preparing a payroll is to determine the number of days worked by each employee.
____ 20. Payroll taxes are based on employee total earnings.
____ 21. Employee total earnings are calculated as regular hours x regular rate, plus overtime hours x overtime rate.
____ 22. Employers in many states are required to withhold state, city, or county income tax from employee earnings.
____ 23. Federal law requires that each employer have on file a properly completed Form W-2, Employee's
Withholding Allowance Certificate, for each employee.
____ 24. A single person will have less income tax withheld than a married employee.
____ 25. Social security tax is paid by the employer only.
____ 26. An act of Congress can change the social security tax base and tax rate at any time.
____ 27. When an employee's earnings exceed the tax base, no more social security tax is deducted.
____ 28. All deductions from employee wages are recorded in a payroll register.
____ 29. The columns of the employee earnings record consist of the amount columns in a payroll register and an
accumulated earnings column.
____ 30. The information used to prepare payroll checks is taken from a payroll register.
Multiple Choice
Identify the choice that best completes the statement or answers the question.
____ 31. The period covered by a salary payment is a ____.
a. bimonthly base
c. pay period
b. pay schedule
d. payroll
____ 32. The total amount earned by all employees for a pay period is a ____.
a. time card
c. wage
b. salary
d. payroll
____ 33. The total pay due for a pay period before deductions is ____.
a. gross pay
c. total earnings
b. gross earnings
d. all of the above
____ 34. Employee regular earnings are calculated as ____.
a. regular hours times regular rate
c. total hours plus overtime rate
b. total hours divided by regular rate
d. overtime hours minus overtime rate
____ 35. Until payment is made, payroll taxes for an employer are ____.
a. an asset
c. capital
b. a liability
d. an expense
____ 36. Federal income tax is withheld from employee earnings ____.
a. only in those states electing to do so
b. in all states with over 10,000,000 population
c. only in states where a state income tax is levied
d. in all 50 states
____ 37. All employees must report their withholding allowances on a ____.
a. payroll register
c. Form W-4
b. memorandum
d. Form W-2
____ 38. A deduction from total earnings of each person legally supported by a taxpayer is a ____.
a. payroll tax
c. federal income tax
b. withholding allowance
d. worker's allowance
____ 39. The withholding allowances of an employee affect ____.
a. social security tax withheld
c. federal unemployment tax owed
b. federal income tax withheld
d. state unemployment tax owed
____ 40. Medicare is for people who ____.
a. have a disability
c. have reached retirement age
b. are in the hospital
d. are under 50 years of age
____ 41. Accurate and detailed payroll records ____.
a. do not have to be retained
b. must be maintained
c. are the responsibility of the employee, not the business
d. none of the above
____ 42. A business form used to record payroll information is ____.
____ 43.
____ 44.
____ 45.
____ 46.
____ 47.
____ 48.
____ 49.
____ 50.
a. a wage register
c. a payroll register
b. a payroll tax register
d. an employee time card
Each employee name is listed in a payroll register along with ____.
a. employee number
c. withholding allowances
b. marital status
d. all of the above
Social security tax is calculated by ____.
a. multiplying total earnings by the tax rate
b. multiplying net earnings by the tax rate
c. using a tax table
d. none of the above
The total earnings paid to an employee after payroll taxes and other deductions is recorded in the payroll
register ____.
a. Gross Pay column
c. Net Pay column
b. Total Earnings column
d. Total Deductions column
Individual payroll checks are usually written on ____.
a. a company's regular checking account
c. a special purposes account
b. a special payroll checking account
d. an employee earnings account
Some businesses deposit employee net pay directly to each employee bank account by using ____.
a. payroll checks
c. EFT
b. payroll registers
d. none of the above
A business form used to record details affecting payments made to an employee is ____.
a. an employee earnings record
c. an employee accounts payable record
b. a payroll journal
d. a tax withholding form
The Accumulated Earnings column of the employee earnings record ____.
a. shows net pay for the year
b. is the total earnings since the first of the year
c. shows net pay for one quarter
d. is the gross earnings for one quarter
The amount on the employee earnings record used to determine if certain payroll taxes apply to an employee's
earnings is ____.
a. net pay
c. gross earnings
b. accumulated earnings
d. social security taxes