PART 1 - SharpSchool



Mr. Calkins

Accounting I

Winter 2008

Understanding Accounting Concepts and Procedures

PART 1

Instructions; Answer the following questions on a separate piece of paper:

1. Explain why gross earnings, not net pay, is debited to the Salaries Expense account.

2. Explain why the amounts withheld from employees’ payroll checks are liabilities of the employer.

3. What account is credited for net pay?

4. How is the employer’s share of FICA tax calculated?

5. How is the employee’s share of FICA tax calculated?

6. State and federal unemployment taxes are percentages of what amount?

7. The debit to Payroll Tax Expense is the total of what amounts?

8. What payroll taxes are deposited monthly in a Federal Reserve Bank or other authorized financial institution?

9. When does an employee receive a Form W-2?

10. Explain how different copies of Form W-2 are distributed.

11. What information is reported on Form W-2?

12. What is the difference between a Form 940 and Form 941?

13. What information is contained on Form W-3?

PART 2

Part A: Fill in the blank

1. The form that accompanies an employer’s payment of social security, Medicare, and employee’s federal income taxes is a(n)_____________.

2. The expense account used to record employees’ earnings is often called__________.

3. Taxes paid by the employer to provide funds for workers who are temporarily out of work are____________.

4. The____________ account is used to record the total of the employer’s payroll taxes.

5. Each year, an employer must prepare and send to the IRS a(n)______________, which summarizes the information contained on the employees’ Wage and Tax Statements.

6. The__________ requires larger businesses to deposit income tax payments by electronic funds transfer.

7. By January 31, employers must provide each employee with a __________, which summarizes the employee’s earnings and taxes withheld.

Part B: True or False

1. ____ In a few states, employees are also required to pay unemployment taxes.

2. ____ The Cash in Bank accounts debited for the amount the employees actually earn in the pay period.

3. ____The only taxes that the employer must pay are unemployment taxes.

4. ____The amount entered for Payroll Tax Expense is the total gross earnings of the pay period.

5. ____The social security tax is paid by both employer and employees.

6. ____Amounts deducted from employees’ earnings and held for payment by the employer become liabilities to the business.

7. ____The entry for Salaries Expense is recorded each pay period, but the entry for Payroll Tax Expense is recorded only at the end of the year.

8. ____When a business transfers money from its regular checking account to the payroll checking account, the check is written for the total net pay amount.

9. ____An employer normally pays federal withholding taxes, social security taxes, and Medicare taxes once a year.

10. ____The payroll register is the source of information for preparing the journal entry for payroll.

Part C: Directions: Indicate whether each of the following statements can be completed

with the word debit or credit.

1. The total amount of gross earnings is entered on the _____side of the Salaries Expense account.

2. The account Employees’ Federal Income Tax Payable ahs a normal ______Balance.

3. The account Salaries Expense has a normal _____balance.

4. The total net pay for the period is recorded as a ________to the Cash in Bank account.

5. When the federal government is paid the amount owed for social security tax, an entry is made on the ______side of the Social Security Tax Payable account.

6. The State Unemployment Tax Payable account is increased by a ________.

7. When federal unemployment taxes are recorded by the employer, a _________entry is made to the Federal Unemployment Tax Payable account.

8. Payroll Tax Expense has a normal _______balance.

9. A decrease to the U.S. Savings Bonds payable account is recorded as a ________.

Part D:

Problem 1- Directions: Based on the payroll information for Romac Electric that follows, find

the correct amount of each tax. Use a separate sheet of paper to show your work.

Total gross earnings: $2,462.00 Social security tax rate: 6.2%

Medicare tax rate: 1.45% State unemployment tax rate: 5.4%

Federal unemployment tax rate: 0.8%

1. Social Security Tax Payable (employees’ and employer’s)

2. Medicare Tax Payable (employees’ and employer’s)

3. State Unemployment Tax Payable

4. Federal Unemployment Tax Payable

Problem 2- Directions: The following totals were taken form the payroll register of the Riche

Moving Company. Record the entry for the weekly payroll in the general journal

provided. The date is June 14, and Check 843 was written to the payroll account.

Total gross earnings of all employees: $9,814.40

Total social security tax withheld: 608.49

Total Medicare tax withheld 142.31

Total federal income tax withheld 1,766.00

Total insurance premiums withheld 804.00

PART E

DIRECTIONS: Create check account slips from the amounts given below for the purchases made for Green Thumb Plant Service and amounts given. Use bold fonts size 11 on the items given as examples, Green Thumb Plant Service 14 Bold caps. Use size 11 (non-bold) for everything else. You will have room for two checks per sheet. Have a separate sheet added for each to the same problem Examples are provided for you on the last two pages:

Green Thumb Plan Service Payroll--------$2,160.37………July 29 (Payroll for week)

First Federal Bank----------------------------$1,121.65………July 30 (Payroll Employee Inc. Tax)

American Insurance Company--------------$228.00..............July 30 (Payroll Employee Insur.)

Pioneer Title Company-----------------------$1,150.00………July 30 (Building Payment)

Pacific Mountain Power----------------------$115.00………..July 30 (Payment of Power Bill)

Intermountain Pepsi---------------------------$52.00 ...............July 30 (Bill for Pop Machine)

PART F

DIRECTION: Create a table in Excel for the weekly payroll ending July 29. Use the employee information below to create the spreadsheet. Categorize them alphabetically last name first. Be sure to show formulas for your work and an example is given attached at the end of these directions. Table Heading should have a 16 Bold Size font, Sub-Headings 11 Bold Size Font, Total column to be 11 Bold and underlined. All other fonts are to be size 10 non-bold. Examples are provided for you on the last two pages:

TAXES ARE CALCUALTED AS FOLLOWS

Social Security is %6.2, Medicare Tax %1.45, Federal Tax %11, State Tax %8,

EMPLOYEE INFORMATION

Michael Alter—Marital (S),Allowance(1), Hours(22), Rate (7.10), Check #310

Daniel Ripp—Marital (M), Allowance (2), Hours (42), Rate (8.30), Check #316

Greg Millette—Marital (M), Allowance (2), Salary (542.50),Rate (8.30), Check #314

Joclyn Filley—Marital (S), Allowance(1), Hours(34.5), Rate(7.40), Check #313

Jesse Dubow—Marital(S), Allowance(0), Salary(250.00), Check #312

Heather Repicky—Marital(M), Allowance(3), Salary (725.00), Check #315

Christine Cuddly—Marital(S), Allowance(0),Hours(36),Rate(8.30), Check #311

Pat Sataro—Marital(S), Allowance(1), Salary(475.00), Check #317

Tom Xylophone—Marital(M), Allowance(3),Hours(46.5),Rate(11.25), Check #320

Gene Sullivan—Martial(M), Allowance(1), Hours (48.00), Rate(9.75), Check #318

Dylan Wojohowski—Marital(S), Allowance(1), Hours (37.50), Rate (7.85) Check #319

Your Name—Marital (S), Allowance(0), Hours (52.25), Rate (9.35), Check #321

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