Principles of Accounting - VYC1 Exam
QUESTIONS AND CORRECT ANSWERS
Which of the following is a factor in the determination of the amount of social security tax to
withhold from an employee's pay?
hours worked during the pay period
gross wages
withholding allowances claimed on Form W-4
marital status - CORRECT ANSWER gross wages
Explanation
Social security tax is calculated as a percentage of gross wages up to a maximum as prescribed by
law.
Which of the following statements is not correct?
The Medicare tax is levied on both the employee and the employer.
To compute the Medicare tax to withhold from the employee's paycheck, multiply the net take-home
wages by the Medicare tax rate of 1.45%.
If an employee works for more than one employer during the year, the FICA tax is deducted and
matched by each employer.
All of these statements are correct. - CORRECT ANSWER To compute the Medicare tax to
withhold from the employee's paycheck, multiply the net take-home wages by the Medicare tax rate
of 1.45%.
,Explanation
The amount of Medicare tax to withhold from the employee's paycheck is determined by multiplying
the gross wages by the Medicare tax rate of 1.45%. There is no base taxable earnings amount as is the
case with FICA.
The amount of federal income tax to withhold from an employee's earnings depends on the
earnings during the pay period and length of the pay period.
earnings during the pay period and length of the pay period, and marital status.
earnings during the pay period and length of the pay period, and number of withholding allowances.
earnings during the pay period and length of the pay period, marital status, and number of
withholding allowances. - CORRECT ANSWER earnings during the pay period and length of
the pay period, marital status, and number of withholding allowances.
Explanation
The amount of federal income tax to withhold from an employee's earnings depends on the earnings
during the pay period and length of the pay period, marital status, and number of withholding
allowances.
Which of the following statements about the payroll register is not correct?
Multiple Choice
The payroll register supplies all the information to make the journal entry to record the payroll.
The hours worked and the pay rate are used to calculate regular pay, the overtime earnings, and gross
pay.
The cumulative earnings after this pay period is computed by adding the beginning cumulative
earnings and the current period's gross pay.
,The deductions are added to the gross earnings to compute Net Amount, which is the amount paid to
each employee. - CORRECT ANSWER The deductions are added to the gross earnings to
compute Net Amount, which is the amount paid to each employee.
Explanation
The deductions are deducted from (rather than added to) the gross earnings to compute Net Amount,
which is the amount paid to each employee.
The employer records the amount of federal income tax withheld from employees as
Multiple Choice
Income Tax Expense.
Employee Income Tax Payable.
Social Security Tax Expense.
Social Security Tax Payable. - CORRECT ANSWER Employee Income Tax Payable.
Explanation
The general journal entry to record the payroll expense includes a debit to each Wages Expense
account (such as Shipping and Office Salaries Expense), a credit to the separate liability account for
each type of deduction (for example, Social Security Tax Payable, Medicare Tax Payable, Employee
Income Tax Payable, Health Insurance Premiums Payable), and a credit to Salaries and Wages
Payable for the amount of the net pay
All details related to an employee's earnings, deductions, and net pay throughout the year would be
found in
Multiple Choice
the Wages Expense account in the general ledger.
the individual earnings record.
, the general journal.
the payroll register. - CORRECT ANSWER the individual earnings record.
Explanation
The employer sets up an individual earnings record for each employee to maintain all details related
to an employee's earnings, deductions, and net pay throughout the year.
Which of the following statements is not correct?
Multiple Choice
The amount of social security tax withheld depends on an employee's gross earnings, marital status,
and number of withholding allowances.
Federal law requires that social security, Medicare, and federal income taxes be deducted from the
gross pay of most employees.
Medicare taxes are levied in an equal amount on both employers and employees.
Once an employee's year-to-date wages reach a certain amount prescribed by law, social security tax
is no longer withheld - CORRECT ANSWER The amount of social security tax withheld
depends on an employee's gross earnings, marital status, and number of withholding allowances.
Explanation
The amount of social security tax withheld depends on an employee's gross earnings, but not marital
status or withholding allowances.
Which of the following statements is correct?
QUESTIONS AND CORRECT ANSWERS
Which of the following is a factor in the determination of the amount of social security tax to
withhold from an employee's pay?
hours worked during the pay period
gross wages
withholding allowances claimed on Form W-4
marital status - CORRECT ANSWER gross wages
Explanation
Social security tax is calculated as a percentage of gross wages up to a maximum as prescribed by
law.
Which of the following statements is not correct?
The Medicare tax is levied on both the employee and the employer.
To compute the Medicare tax to withhold from the employee's paycheck, multiply the net take-home
wages by the Medicare tax rate of 1.45%.
If an employee works for more than one employer during the year, the FICA tax is deducted and
matched by each employer.
All of these statements are correct. - CORRECT ANSWER To compute the Medicare tax to
withhold from the employee's paycheck, multiply the net take-home wages by the Medicare tax rate
of 1.45%.
,Explanation
The amount of Medicare tax to withhold from the employee's paycheck is determined by multiplying
the gross wages by the Medicare tax rate of 1.45%. There is no base taxable earnings amount as is the
case with FICA.
The amount of federal income tax to withhold from an employee's earnings depends on the
earnings during the pay period and length of the pay period.
earnings during the pay period and length of the pay period, and marital status.
earnings during the pay period and length of the pay period, and number of withholding allowances.
earnings during the pay period and length of the pay period, marital status, and number of
withholding allowances. - CORRECT ANSWER earnings during the pay period and length of
the pay period, marital status, and number of withholding allowances.
Explanation
The amount of federal income tax to withhold from an employee's earnings depends on the earnings
during the pay period and length of the pay period, marital status, and number of withholding
allowances.
Which of the following statements about the payroll register is not correct?
Multiple Choice
The payroll register supplies all the information to make the journal entry to record the payroll.
The hours worked and the pay rate are used to calculate regular pay, the overtime earnings, and gross
pay.
The cumulative earnings after this pay period is computed by adding the beginning cumulative
earnings and the current period's gross pay.
,The deductions are added to the gross earnings to compute Net Amount, which is the amount paid to
each employee. - CORRECT ANSWER The deductions are added to the gross earnings to
compute Net Amount, which is the amount paid to each employee.
Explanation
The deductions are deducted from (rather than added to) the gross earnings to compute Net Amount,
which is the amount paid to each employee.
The employer records the amount of federal income tax withheld from employees as
Multiple Choice
Income Tax Expense.
Employee Income Tax Payable.
Social Security Tax Expense.
Social Security Tax Payable. - CORRECT ANSWER Employee Income Tax Payable.
Explanation
The general journal entry to record the payroll expense includes a debit to each Wages Expense
account (such as Shipping and Office Salaries Expense), a credit to the separate liability account for
each type of deduction (for example, Social Security Tax Payable, Medicare Tax Payable, Employee
Income Tax Payable, Health Insurance Premiums Payable), and a credit to Salaries and Wages
Payable for the amount of the net pay
All details related to an employee's earnings, deductions, and net pay throughout the year would be
found in
Multiple Choice
the Wages Expense account in the general ledger.
the individual earnings record.
, the general journal.
the payroll register. - CORRECT ANSWER the individual earnings record.
Explanation
The employer sets up an individual earnings record for each employee to maintain all details related
to an employee's earnings, deductions, and net pay throughout the year.
Which of the following statements is not correct?
Multiple Choice
The amount of social security tax withheld depends on an employee's gross earnings, marital status,
and number of withholding allowances.
Federal law requires that social security, Medicare, and federal income taxes be deducted from the
gross pay of most employees.
Medicare taxes are levied in an equal amount on both employers and employees.
Once an employee's year-to-date wages reach a certain amount prescribed by law, social security tax
is no longer withheld - CORRECT ANSWER The amount of social security tax withheld
depends on an employee's gross earnings, marital status, and number of withholding allowances.
Explanation
The amount of social security tax withheld depends on an employee's gross earnings, but not marital
status or withholding allowances.
Which of the following statements is correct?
