SOLUTION MANUAL
Payroll Accounting 2024, 34th Edition
by Bernard J. Bieg, Bridget Stomberg, Chapters 1 - 7
, CONTENTS
Chapter 1: The Need for Payroll and Personnel Records
Chapter 2: Computing Wages and Salaries
Chapter 3: Social Security Taxes
Chapter 4: Income Tax Withholding
Chapter 5: Unemployment Compensation Taxes
Chapter 6: Analyzing and Journalizing Payroll
Chapter 7: Payroll Project
,Chapter 1
Which Law?
1. K
2. H
3. B
4. F
5. I
6. J
7. A
8. D
9. G
10. C
11. E
12. L
Which Payroll Law?
1. D
2. A
3. F
4. C
5. G
6. J
7. B
8. I
9. E
10. H
What’s Ethical?
1. Answers will vary. Some concerns include data privacy and integrity in the
software switchover, tax and employee pay integrity on the new software, and
employee pay methods.
,2. Answers will vary. Karsyn could choose to ignore her sorority sister’s request, claiming
Confidentiality. She could also discontinue active participation in the sorority. In any case,
Karsyn must not consent to her sorority sister’s request for confidential information.
Confidential Records
As the payroll clerk, your task is to protect the privacy and confidentiality of the information you
maintain for the company. If a student group—or any personnel aside from the company’s
payroll employees and officers—wishes to review confidential records, you should deny their
request. If needed, you should refer the group to your department’s manager to discuss the
matterin more depth. The laws that apply to this situation are the Privacy Act of 1974, U.S.
Departmentof Health and Human Services Privacy Act 09-40-0006, Common-Law Privacy Act,
Computer Fraud and Abuse Act, and potentially HIPAA.
Large vs. Small
1. Large companies face issues with multiple departments, employee access to
online personnel portals, employee data security, and timekeeping accuracy.
2. For small companies, payroll processing will involve fewer employees than for larger
companies. Smaller companies could maintain their payroll needs using company
personnel because of the lower volume of transactions. Larger companies need to
consider their available trained payroll accountants and other staff to determine if
theycan reliably handle the volume of payroll needs in a timely and accurate manner.
What Is the Difference?
, a. Manual payroll systems involve the use of paper and pencil record-keeping or
a spreadsheet program, such as Microsoft Excel. This is most appropriate for
very small firms.
b. Computerized payroll systems can be used by any company, regardless of size.
Examples of computerized systems include QuickBooks, Sage 100, and
Microsoft Dynamics 365 GP. These computer packages range in price,
depending on the company size and operational scope.
c. Outsourced payroll involves the engagement of a third party to manage a
company’s payroll data, issue employee compensation, and prepare tax
forms.
d. Certified payroll pertains to companies with employees who work on federal
government contracts. Certified payroll ensures that a company reports payroll
expenditures of contractually allocated money.
ANSWERS TO END-OF-CHAPTER MATERIALS
REVIEW QUESTIONS
1. What is the purpose of a payroll system?
a. Provide for internal and external reporting of employee wages and
associated taxes, payment of employee compensation, and monitoring of
benefits to employees. It also serves as a means of tracking labor costs that
managers use for decision-making, budgeting, and planning.
2. What are two differences between large- and small-company payroll practices?
a. Small companies would have fewer employees and reporting requirements
and would be less likely to be required to have automated payroll systems.
, b. Large companies have more employees and greater departmentalization. This
increase in employees leads to a higher level of complexity in payroll accounting,
disbursements, and reporting. Larger companies may also provide Intranet portals
foremployee self-service options. Additionally, larger companies may need
additional accuracy checks.
3. What is certified payroll? Which companies must use it?
a. Certified payroll is a reporting requirement for companies that work with federal
contracts that are subject to Davis-Bacon wages. Only those companies that
havethese types of employees would be required to complete a certified payroll.
4. Why might it be a good idea to let employees manage their payroll records? What are
someof the pitfalls?
a. An advantage of allowing individuals to self-manage their payroll records would be
the employee would be able to answer some simple questions on their own
without having to come to the payroll accountant for answers. If employees have
access to their payroll records, there would be the need to allow multiple access
points to the confidential information. These open channels would require security
settings to ensure the requirements of confidentiality are maintained.
5. What are two ways a payroll system may protect a company in the event of a visit from
agovernment auditor?
Answers may vary, but should contain:
a. The establishment and maintenance of an accurate payroll system. Timely and
accurately reporting wages and withholdings. Adherence to the legal framework
ofpayroll.
,6. What is payroll outsourcing? When might a company consider outsourcing its payroll?
a. Payroll outsourcing is the process of contracting another company for the
preparation,reporting, and filing of employee payroll. Companies may consider this
option if the company sees a benefit to the company that outweighs the cost of
outsourcing.
7. What are three examples of federal laws that are essential to ensure legal, fair
hiringpractices?
Answers should contain three the following:
a. American with Disabilities Act
b. Age Discrimination in Employment Act
c. Fair Labor Standards Act
d. Civil Rights Act
8. What are the major types of payroll processing methods?
a. Manual
b. Computerized
c. Outsourced
d. Certified
9. What are two laws governing the taxes that employers must withhold from employees?
a. 16th Amendment of the U.S. Constitution
b. Social Security Insurance Act
10. What are the guidelines for FLSA, in terms of overtime and pay rate?
a. Maximum hours that covered individuals can work
b. Minimum pay for covered individuals
c. Minimum age for workers
, d. Mandatory break times for covered employees
11. Why was the Social Security Act of 1935 created? What were its provisions?
a. The Social Security Act of 1935 was designed to create a contribution-driven fund
to achieve a level of financial stability for the worker when he or she became too old
orinfirm to work.
12. How did the Medicare and Medicaid Act of 1965 modify the Social Security Act of 1935?
a. It was passed to fund medical services needed by older adults, disabled persons,
andlow-income individuals.
13. What are two of the advantages of a computerized payroll system over a manual system?
a. A computerized payroll system can meet the tax and regulatory requirements
efficiently and can typically be set to automatically update for tax law changes. Web
portals can streamline overtime reporting and other functions. A recent trend in
computerized processing is the issuance of employee paycards.
14. Which Act created the term ―full-time equivalents‖?
a. The Affordable Care Act created the term full time equivalents to determine the
number of employees that should be offered health care coverage under the
act.
15. How has cloud-based payroll processing affected contemporary payroll practices?
a. Cloud-based payroll processing allows a company the scale of larger corporations
without the additional licensing or responsibilities for updates. Cloud-based
servicescan contain security comparable with on-site accounting software.
16. What are two differences between the completion of the I-9 and E-Verify systems?
Answers may vary, but could contain the following:
a. I-9 is mandatory while E-Verify is voluntary.
, b. I-9 does not require a Social Security number while E-Verify does.
c. I-9 does not require a photo identification (List B) while E-Verify does.
d. I-9 must be used to reverify expired employment authority while E-Verify may
not be used for this purpose.
17. What was the purpose of the SECURE Act?
a. The SECURE Act provided tax incentives for small employers to create
automatic retirement plans for their employees.
18. What are two of the challenges that arise from the use of outsourced payroll systems?
Answers may vary, but should contain:
a. Late penalties
b. Loss of credibility
c. Flawed payroll
d. Security breaches of personnel information
19. What distinguishes a ―living wage‖ from the minimum wage?
a. The federal labor standards act depicts the federal minimum wage. While
several states may have a rate over this, the living wage would need to
exceed the poverty level for the family size and geographic region.
20. How does the Equal Pay Act of 1963 differ from the Lilly Ledbetter Fair Pay Act of 2009?
a. While the Equal Pay Act of 1963 mandated that men and women receive
equal compensation for comparable work, Lilly Ledbetter Fair Pay Act of
2009 removed the statutory timeframe for filing the allocation of unfair pay
practices.
21. What are the differences between ARPA and TCDRA?
, a. American Rescue Plan Act of 2021 (APRA) extended employee retention
credits and family/sick leave related to COVID-19 through September 30,
2021. APRA increased the rate to $12,000 and eliminated the 10-day waiting
period. Taxpayer Certainty and Disaster Recovery Tax Act of 2020 (TCDRA)
also extended the employee retention tax credits and changed the amount
per employee. TCDRA extended the date through June 30, 2021 and
increased the amount to $14,000. The definition of qualified wages for both
over and under 500 employees was also altered. TCDRA also allowed
employers to take a refundable credit against their share of the Social
Security taxes, up to 70% of the qualified wages paid to employees between
December 31, 2020 and June 30, 2021.
22. What did ARPA and TCDRA do to the CARES Act?
a. Both the ARPA and TCDRA extended benefits of the CARES Act and
made alterations to the amount of employee retention credits.
EXERCISES – SET A
E1-1A. Lupore Fabrics obtained a contract in Watts Mills, South Carolina, which
involves the production of materials for military uniforms, a project contracted with the
federal government for $2,800,000. What laws govern the wages Lupore Fabrics pays
to its workers for this project? (Select all that apply.)
1. Davis-Bacon Act
3. Walsh-Healey Act
4. FLSA – Fair Labor Standards Act
Payroll Accounting 2024, 34th Edition
by Bernard J. Bieg, Bridget Stomberg, Chapters 1 - 7
, CONTENTS
Chapter 1: The Need for Payroll and Personnel Records
Chapter 2: Computing Wages and Salaries
Chapter 3: Social Security Taxes
Chapter 4: Income Tax Withholding
Chapter 5: Unemployment Compensation Taxes
Chapter 6: Analyzing and Journalizing Payroll
Chapter 7: Payroll Project
,Chapter 1
Which Law?
1. K
2. H
3. B
4. F
5. I
6. J
7. A
8. D
9. G
10. C
11. E
12. L
Which Payroll Law?
1. D
2. A
3. F
4. C
5. G
6. J
7. B
8. I
9. E
10. H
What’s Ethical?
1. Answers will vary. Some concerns include data privacy and integrity in the
software switchover, tax and employee pay integrity on the new software, and
employee pay methods.
,2. Answers will vary. Karsyn could choose to ignore her sorority sister’s request, claiming
Confidentiality. She could also discontinue active participation in the sorority. In any case,
Karsyn must not consent to her sorority sister’s request for confidential information.
Confidential Records
As the payroll clerk, your task is to protect the privacy and confidentiality of the information you
maintain for the company. If a student group—or any personnel aside from the company’s
payroll employees and officers—wishes to review confidential records, you should deny their
request. If needed, you should refer the group to your department’s manager to discuss the
matterin more depth. The laws that apply to this situation are the Privacy Act of 1974, U.S.
Departmentof Health and Human Services Privacy Act 09-40-0006, Common-Law Privacy Act,
Computer Fraud and Abuse Act, and potentially HIPAA.
Large vs. Small
1. Large companies face issues with multiple departments, employee access to
online personnel portals, employee data security, and timekeeping accuracy.
2. For small companies, payroll processing will involve fewer employees than for larger
companies. Smaller companies could maintain their payroll needs using company
personnel because of the lower volume of transactions. Larger companies need to
consider their available trained payroll accountants and other staff to determine if
theycan reliably handle the volume of payroll needs in a timely and accurate manner.
What Is the Difference?
, a. Manual payroll systems involve the use of paper and pencil record-keeping or
a spreadsheet program, such as Microsoft Excel. This is most appropriate for
very small firms.
b. Computerized payroll systems can be used by any company, regardless of size.
Examples of computerized systems include QuickBooks, Sage 100, and
Microsoft Dynamics 365 GP. These computer packages range in price,
depending on the company size and operational scope.
c. Outsourced payroll involves the engagement of a third party to manage a
company’s payroll data, issue employee compensation, and prepare tax
forms.
d. Certified payroll pertains to companies with employees who work on federal
government contracts. Certified payroll ensures that a company reports payroll
expenditures of contractually allocated money.
ANSWERS TO END-OF-CHAPTER MATERIALS
REVIEW QUESTIONS
1. What is the purpose of a payroll system?
a. Provide for internal and external reporting of employee wages and
associated taxes, payment of employee compensation, and monitoring of
benefits to employees. It also serves as a means of tracking labor costs that
managers use for decision-making, budgeting, and planning.
2. What are two differences between large- and small-company payroll practices?
a. Small companies would have fewer employees and reporting requirements
and would be less likely to be required to have automated payroll systems.
, b. Large companies have more employees and greater departmentalization. This
increase in employees leads to a higher level of complexity in payroll accounting,
disbursements, and reporting. Larger companies may also provide Intranet portals
foremployee self-service options. Additionally, larger companies may need
additional accuracy checks.
3. What is certified payroll? Which companies must use it?
a. Certified payroll is a reporting requirement for companies that work with federal
contracts that are subject to Davis-Bacon wages. Only those companies that
havethese types of employees would be required to complete a certified payroll.
4. Why might it be a good idea to let employees manage their payroll records? What are
someof the pitfalls?
a. An advantage of allowing individuals to self-manage their payroll records would be
the employee would be able to answer some simple questions on their own
without having to come to the payroll accountant for answers. If employees have
access to their payroll records, there would be the need to allow multiple access
points to the confidential information. These open channels would require security
settings to ensure the requirements of confidentiality are maintained.
5. What are two ways a payroll system may protect a company in the event of a visit from
agovernment auditor?
Answers may vary, but should contain:
a. The establishment and maintenance of an accurate payroll system. Timely and
accurately reporting wages and withholdings. Adherence to the legal framework
ofpayroll.
,6. What is payroll outsourcing? When might a company consider outsourcing its payroll?
a. Payroll outsourcing is the process of contracting another company for the
preparation,reporting, and filing of employee payroll. Companies may consider this
option if the company sees a benefit to the company that outweighs the cost of
outsourcing.
7. What are three examples of federal laws that are essential to ensure legal, fair
hiringpractices?
Answers should contain three the following:
a. American with Disabilities Act
b. Age Discrimination in Employment Act
c. Fair Labor Standards Act
d. Civil Rights Act
8. What are the major types of payroll processing methods?
a. Manual
b. Computerized
c. Outsourced
d. Certified
9. What are two laws governing the taxes that employers must withhold from employees?
a. 16th Amendment of the U.S. Constitution
b. Social Security Insurance Act
10. What are the guidelines for FLSA, in terms of overtime and pay rate?
a. Maximum hours that covered individuals can work
b. Minimum pay for covered individuals
c. Minimum age for workers
, d. Mandatory break times for covered employees
11. Why was the Social Security Act of 1935 created? What were its provisions?
a. The Social Security Act of 1935 was designed to create a contribution-driven fund
to achieve a level of financial stability for the worker when he or she became too old
orinfirm to work.
12. How did the Medicare and Medicaid Act of 1965 modify the Social Security Act of 1935?
a. It was passed to fund medical services needed by older adults, disabled persons,
andlow-income individuals.
13. What are two of the advantages of a computerized payroll system over a manual system?
a. A computerized payroll system can meet the tax and regulatory requirements
efficiently and can typically be set to automatically update for tax law changes. Web
portals can streamline overtime reporting and other functions. A recent trend in
computerized processing is the issuance of employee paycards.
14. Which Act created the term ―full-time equivalents‖?
a. The Affordable Care Act created the term full time equivalents to determine the
number of employees that should be offered health care coverage under the
act.
15. How has cloud-based payroll processing affected contemporary payroll practices?
a. Cloud-based payroll processing allows a company the scale of larger corporations
without the additional licensing or responsibilities for updates. Cloud-based
servicescan contain security comparable with on-site accounting software.
16. What are two differences between the completion of the I-9 and E-Verify systems?
Answers may vary, but could contain the following:
a. I-9 is mandatory while E-Verify is voluntary.
, b. I-9 does not require a Social Security number while E-Verify does.
c. I-9 does not require a photo identification (List B) while E-Verify does.
d. I-9 must be used to reverify expired employment authority while E-Verify may
not be used for this purpose.
17. What was the purpose of the SECURE Act?
a. The SECURE Act provided tax incentives for small employers to create
automatic retirement plans for their employees.
18. What are two of the challenges that arise from the use of outsourced payroll systems?
Answers may vary, but should contain:
a. Late penalties
b. Loss of credibility
c. Flawed payroll
d. Security breaches of personnel information
19. What distinguishes a ―living wage‖ from the minimum wage?
a. The federal labor standards act depicts the federal minimum wage. While
several states may have a rate over this, the living wage would need to
exceed the poverty level for the family size and geographic region.
20. How does the Equal Pay Act of 1963 differ from the Lilly Ledbetter Fair Pay Act of 2009?
a. While the Equal Pay Act of 1963 mandated that men and women receive
equal compensation for comparable work, Lilly Ledbetter Fair Pay Act of
2009 removed the statutory timeframe for filing the allocation of unfair pay
practices.
21. What are the differences between ARPA and TCDRA?
, a. American Rescue Plan Act of 2021 (APRA) extended employee retention
credits and family/sick leave related to COVID-19 through September 30,
2021. APRA increased the rate to $12,000 and eliminated the 10-day waiting
period. Taxpayer Certainty and Disaster Recovery Tax Act of 2020 (TCDRA)
also extended the employee retention tax credits and changed the amount
per employee. TCDRA extended the date through June 30, 2021 and
increased the amount to $14,000. The definition of qualified wages for both
over and under 500 employees was also altered. TCDRA also allowed
employers to take a refundable credit against their share of the Social
Security taxes, up to 70% of the qualified wages paid to employees between
December 31, 2020 and June 30, 2021.
22. What did ARPA and TCDRA do to the CARES Act?
a. Both the ARPA and TCDRA extended benefits of the CARES Act and
made alterations to the amount of employee retention credits.
EXERCISES – SET A
E1-1A. Lupore Fabrics obtained a contract in Watts Mills, South Carolina, which
involves the production of materials for military uniforms, a project contracted with the
federal government for $2,800,000. What laws govern the wages Lupore Fabrics pays
to its workers for this project? (Select all that apply.)
1. Davis-Bacon Act
3. Walsh-Healey Act
4. FLSA – Fair Labor Standards Act
