Payroll Accounting 2017 3rd Edition

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 Chapter 04
Employee Net Pay and Pay Methods

True / False Questions

1. Two classes of deductions exist: pre-tax and post-tax.

True False

2. Federal income tax, Medicare tax, and Social Security tax amounts withheld from employee pay are
matched by amounts paid by the employer.

True False

3. The amount of federal income tax decreases as the number of allowances increases.

True False

4. The wage-bracket of determining federal tax withholding yields more accurate amounts than the
percentage method.

True 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.

True False

6. The regular Medicare tax deduction is 1.45% for employee and employer and must be paid by all
employees.

True False

4-1
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
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.

True 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.

True False

9. Charitable contributions are an example of post-tax voluntary deductions.

True False

10. The use of paycards as a means of transmitting employee pay began in the 1990s with over-the-road
drivers out of a need to transmit funds reliably on payday.

True False

Multiple Choice Questions

11. Which of the following deductions may be taken on a pre-tax basis (Select all that apply)?

A. Cafeteria plan
B. Garnishments
C. Health insurance
D. Retirement plan

12. Which Act extended health care benefits to employee dependents until age 26?

A. Health Insurance Portability and Affordability Act

B. Americans with Disabilities Act
C. Family Medical Leave Act
D. Affordable Care Act

4-2
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McGraw-Hill Education.
13. Which of the following guidelines does the IRS use to evaluate the tax treatment of supplemental health
insurance?

A. If the income derived is taxable, then the cost is tax-free.

B. If the income derived is nontaxable, then the cost must be taxed.
C. If the income derived will be tax free, then the cost is also tax exempt.
D. If the income derived is taxable, then the cost is taxable.

14. If a firm has fewer than 100 employees, which of the following is true?

A. It must offer an ESOP.

B. Direct deposit of employee pay is mandatory.
C. It must match employee contributions to federal income tax.
D. It may offer a SIMPLE defined contribution plan.

15. Which of the following may be included as part of an employee's Section 125 "cafeteria" plan?

A. Medical expenses
B. Tuition expenses
C. Meal expenses
D. Moving expenses

16. Health Savings Accounts may be used as pre-tax deductions for which type of costs (Select all that apply)?

A. Child medical expenses

B. Gasoline expenses
C. Long-term care expenses
D. Prescription expenses

17. Which of the following best describes a SEP?

A. The employer or employee establishes and employer contributes to a tax-favorable IRA.

B. The employer establishes a tax-favorable IRA for the employee.
C. The employee rolls over an existing IRA to his or her employer and the current employer
continues contributions.
D. The employer creates a taxable IRA to which the employee must make a defined contribution.

4-3
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
18. 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?

A. Date of
birth
B. Annual salary
C. Marital status
D. Prior year's tax return

19. What role does the employer play regarding an employee's federal withholding tax?

A. Collector and
depositor
B. Reporter and depositor
C. Collector and verifier
D. Verifier and
reporter

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. $2,000
B. $1,970
C. $1,940
D. $1,910

4-4
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
21. Max earned $1,019.55 during the most recent semimonthly pay period. He is single with 1 withholding
allowance and has no pre-tax deductions. Using the following table, how much should be withheld for
federal income tax?

A. $118.00
B. $94.00
C. $96.00
D. $93.00

4-5
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
22. 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. $91.00
B. $89.00
C. $95.00
D. $69.00

4-6
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of
McGraw-Hill Education.
Another random document with
no related content on Scribd:
 Jenson was afforded any opportunity for exercising his art in Paris

Footnote 320

Grimm, Kleine Schrifter, v., 191.

Grimm, Kleine Schriften, v., 191.

Footnote 452

Lorck, C. B., Handbuch der Gesch. der Buchdrücker-Kunst, 13, Leipzig,

1882.
Lorck, C. B., Handbuch der Gesch. der Buchdrucker-Kunst, 13, Leipzig,
1882.

Errata

p. 255
Ibun-l-abbáns and Ibun-l-abbar should read Ibn al-Abbar
p. xxviii, Footnote 254, 303, 375
Bibliothèque de l’École de Chartres should read Bibliothèque de l’École de
Chartes
p. 462, 463
The address New York: 29 West 23d St. London: 24 Bedford St., Strand
should read New York: 27 West 23d St. London: 24 Bedford St., Strand
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