Name_____________________________________________________________________________

Class Day and Time________________________________________________________________

Principles of Accounting I – Bonus Quiz – Payroll Accounting
Jake’s Hot Dog Stand has four employees, Bob, Jim, Sam, and Joe, who earn annual salaries of
$108,000, $96,000, $15,000, and, $3,000, respectively. Assume the rates and limits used in class.
1) Show and label computations of the total Wages subject to the following taxes.
FICA Taxes Medicare Taxes SUTA Taxes FUTA Taxes

2) Show computations of the following taxes.

FICA Taxes Medicare Taxes SUTA Taxes FUTA Taxes

3) Giving a summary entry for the year, give journal entry for the accrual of the employee’s salaries.
Federal income taxes withheld, $24,000; group insurance premiums withheld, $2,513.

4) Give the journal entry for payment of the net payroll.

 5) Give the journal entry for the accrual of the employer’s related payroll taxes.

.
6) Compute the employer’s total payroll expense for the year. Show and label computations.

7) On January 22 of the following year the company paid all the tax liabilities related to the
December 31, fiscal year-end payroll.
 Name___________________________________________________________________________

Principles of Accounting I – Bonus Quiz – continued

True/False – Use a + sign for true, and a O sign for false

1. Taxes for unemployment benefits must usually be paid by both the 1._______
employee and the employer.

2. Federal income taxes withheld from employees wages appear in the accounting 2._______
records of the employer as part of the Payroll Tax Expense.

3. An employee who earns $15,000 a year must pay twice as much FICA tax 3._______
as an employee who earns $7,500.

4. An employee’s Withholding Allowance Certificate (W-4 form) relates only 4._______

to federal income taxes rather than to the FICA tax.

5. A payroll withholding is legally paid by the employee, but when withheld 5._______
is a liability for the employer.

6. The base to which FICA taxes are applicable is lower than the base for 6._______
FUTA taxes.

7. By January 31 each year, employers are required to furnish every employee 7._______
with a statement showing gross wages and withholdings for the prior year,
the W-2 form, Wage and Tax Statement.

8. In determining whether an employee’s accumulated earnings have reached the 8._______

maximum amount subject to FICA taxes, the employer uses the fiscal year on
which his books are maintained, even if his fiscal year differs from the
calendar year.

9 . The term salaries usually refers to compensation on an hourly rate or piecework 9._______
basis, whereas the term wages refers to compensation on a monthly or yearly
basis.

10. Net earning or “take-home pay” is equal to the gross earnings minus the 10._______
deduction for federal income tax.

11. Sales taxes and excise taxes collected by a retail store will appear as an
operating expense on the store’s income statement at fiscal year-end. 11._______

12. All other factors being the same, a married person earning $10,000 a year
would pay more in federal income taxes than a singe person earning
$10,000 a year. 12._______
 Name____________________________________________________________________________
Principles of Accounting I – Bonus Quiz – Accounting Principles - Use + for true, O for false.
1. Under the entity principle, an accounting entity, such as a single proprietorship, 1._______
partnership, or corporation, must be viewed as a separate legal entity by the
government.
2. Changing from LIFO to FIFO is a violation of the consistency principle, and 2._______
requires disclosure in the financial statements.

3. Allocating the cost of an intangible asset over its estimated economic useful life 3._______
is justified by the realization principle.

4. In general, the pronouncements of the SEC have greater authority than the 4._______
pronouncements of the FASB.

5. Adherence to generally accepted accounting principles is equally important in the 5._______

area of managerial accounting as it is in the area of financial accounting.

6. Application of the lower of cost or market rule when valuing inventory is 6._______
supported by the conservatism principle.

7. The disclosure principle is more closely associated with the materiality principle 7._______
than with the matching principle.

8. Revenue is said to be realized when the earnings process is essentially complete, 8._______
usually at the point of sale.

9 . In the United States, continued use of the historical cost accounting is supported 9._______
by the objectivity principle.

10. In 1973 the FASB replaced the Accounting Principles Board (APB) as the primary 10._______
private sector group charged with the responsibility of developing rules and
principles for the practice of accounting.
11. Recording the cost of a wastebasket as a revenue expenditure, rather than as a 11._______
capital expenditure may be justified by the materiality principle.

12. The use of the allowance method of accounting for bad debts, as opposed to the 12._______
direct charge-off method, is supported by the matching principle.

13. The objectivity principle dictates that the use of judgments or estimates is not 13._______
allowed.
14. Allocating the cost of a fixed asset over its estimated economic useful life can be 14._______
related to both the matching principle and the going concern assumption.

15. The term generally accepted accounting principles (GAAP) refers to a common set
of assumptions, concepts, principles, and practices that accountants follow when 15._______
preparing financial statements.
16. The realization principle assumes that an entity will continue to operate in the 16._______
future, unless there is evidence to the contrary.

17. For a retail business, charging the cost of merchandise to expense at the time of 17._______
purchase is supported by the matching principle.