Chap 5 Exercise Set B

Question 1

Chastity Santos is in the process of computing net pay for the employees of Happy Crab Marketing.

Place the following steps in order after Chastity has determined the amount of gross pay?

a. Compute Social Security and Medicare tax withholding.
b. Compute income tax withholding(s).
c. Compute pre-tax deductions.
d. Compute post-tax deductions.

Answer 1

c, b, a, d

Question 2

Joey Martel is an employee of Overclock Watches. His employer would like to give him a bonus and has asked you to gross it up to ensure that Joey receives the full amount of the desired award.

Which of the following should be considered in the denominator to compute the grossed-up amount?

Check all that apply:

• 401(k) contribution.
• Income tax(es).
• Social Security and Medicare taxes.
• Health insurance premium.

Answer 2

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- Income tax(es).
- Social Security and Medicare taxes.
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Question 3

Liam Figueroa is the payroll accountant for Chop Brothers Coffee. As he prepares to use wage-bracket tables to determine federal income tax withholdings for each employee, which information should he have available?

Check all that apply:

• Year-to-date earnings.
• Number and type of dependents.
• Filing status.
• Job title.

Answer 3

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- Number and type of dependents.
- Filing status.
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Question 4

Which of the following are steps in computing federal income tax withholding using the percentage method?

Check all that apply:

• Apply the tax rate to the taxable portion of the earnings.
• Compute and deduct withholding allowance.
• Add the marginal tax.
• Determine if the employee is exempt or nonexempt.

Answer 4

• Apply the tax rate to the taxable portion of the earnings.
• Compute and deduct withholding allowance.
• ## Add the marginal tax.

Question 5

Which of the following are true about Social Security and Medicare tax deductions?

Multiple Choice

• They are applied to the gross pay.
• Contributions to a 401(k) plan are exempt from these taxes.
• Medicare taxes apply to all earnings equally.
• Certain pre-tax deductions are exempt from Social Security and Medicare tax computations.

Answer 5

Certain pre-tax deductions are exempt from Social Security and Medicare tax computations.

Question 6

Scout Freeman is the vice president for marketing at Sun Field Industries. She earns $140,000 annually and is paid on a semimonthly basis. As of October 31, Scout has year-to-date earnings of $133,667. The Social Security wage base is $137,700.

What is the maximum amount of her taxable earnings that may be subject to Social Security tax for the November 15 pay period?

Multiple Choice

• $0.00
• $1,833
• $5,833
• $4,033

Answer 6

$4,033

($137,700 − 133,667 = $4,033. Scout earns 140,000/24 = $5,833.33 per pay period so only the $4,033 would be taxable for Social Security .)

Question 7

Which of the following is true about state and local income tax?

Check all that apply:

• Nine states do not have a personal income tax on earnings.
• Pre-tax deduction rules for federal income tax are generally the same for state and local income taxes.
• State income tax computations vary among states.
• All localities levy income taxes on employees.

Answer 7

• Nine states do not have a personal income tax on earnings.
• Pre-tax deduction rules for federal income tax are generally the same for state and local income taxes.
• State income tax computations vary among states.

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Question 8

Which of the following is true about employee pay methods?

Check all that apply:

• Employers must keep a record of all pay disbursements.
• Employees must be able to access the full amount of their net pay upon demand.
• Paycards may be reloaded with an employee’s net pay on the pay date.
• Employees do not need to own a bank account to receive their pay via direct deposit.

Answer 8

• Employers must keep a record of all pay disbursements.
• Paycards may be reloaded with an employee’s net pay on the pay date.

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Question 9

Which of the following states does not withhold employee income tax?

Check all that apply:

• Tennessee
• Washington
• North Dakota
• Alabama

Answer 9

• Tennessee
• ## Washington-

Question 10

Margarita Sutton is preparing a training session for her colleagues about payroll check fraud.

Required:
Which of the following may be indicators of check fraud?

Check all that apply:

• Changes in font type between company address and employee name.
• Company logo on the face of the check.
• The Check number is missing from the check.
• Only one signature is required from the company.

Answer 10

• Changes in font type between company address and employee name.
• The Check number is missing from the check.

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