| 7. |
FUTA
is an acronym for “Federal Unemployment Tax Act,” and
SUTA is an acronym for “State
Unemployment Tax Act.” These are programs that provide temporary
income to unemployed workers.
FUTA and SUTA are taxes that are imposed only upon employers,
and not on employees. The FUTA
rate is 6.2%; however, a credit of up to 5.4% is allowed to states
that impose state unemployment taxes. |
| 8. |
Federal
and state income tax withholding are not employer expenses. The
employer is simply holding
back some of the employee pay that the employee will need to pay
income taxes. Soon after the end of
the payroll period the employer transfers the withheld amounts
to the federal and state taxing authorities. |
| 9. |
Average
daily pay $170 × 30 employees × 1.5 days per employee
= $7,650. |
|
| |
| |
|
|
| Vacation
Pay Expense |
7,650 |
|
| Vacation
Pay Liability |
|
7,650 |
|
|
|
| 10. |
A
payroll register is used to record all the wages and withholding
for each payroll period. It is often the
source of the journal entry for that period’s payroll. It
is also the source of the information that flows
into the each employee’s earnings record. An employee earnings
record is a legally required permanent
record maintained for each employee. (See 5 above.) |
| 11. |
Internal control
for payroll: |
| |
 Separation
of duties: The payroll calculations are prepared by people who
do not work in the
Human Resources (Personnel) Department
and who do not distribute paychecks or have
access to cash. |
| |
Time
cards: Time cards are maintained to record the hours worked. Time
card use is supervised
and checked for accuracy. |
| |
Double
check: Payroll calculations are independently checked for accuracy
by another person in the
payroll or accounting department. If
a computer is used for calculations, calculations are randomly
sampled and verified. |
| |
Paycheck
distribution controls: Paychecks are not distributed by immediate
supervisors, and a photo
ID is required to obtain a paycheck or
a paycheck is sent directly to an employee. |
| |
Other
payment controls: Payroll bank accounts, independent payroll services,
and use of
voucher system. |
| 12. |
Wrong.
The SUTA tax (and other payroll taxes) should be calculated on
the amount of current gross pay
that does not exceed the wage base limit. Because January
is the first month of the year, we can safely
assume that Dave’s cumulative gross pay is the same as his
January gross pay, which is $4,500 and
which does not exceed the SUTA limit of $7,000. Therefore, the
SUTA tax should be calculated on the
full $4,500: $4,500 × .054 = $243. |
| 13. |
FLSA
refers to the Fair Labor Standards Act, which is a federal law.
This law affects many aspects of
employment, especially working conditions and pay rates. In particular,
the FLSA sets the minimum
hourly wage. It also sets the number of hours an employee works
to be paid overtime as well as the
minimum overtime rate of pay. |
| 14. |
Gross
pay: ($20 × 40 hours) + (8 hours and $30) = $1,040. Net
pay: $1,040 – $220 income tax –
($1,040 × .0765 FICA) = $740.44. |
| 15. |
First,
an employer pays gross wages to employees. Second, an employer
pays payroll taxes (FICA,
FUTA, SUTA, and sometimes additional state and local taxes). Third,
many employers also pay
employee benefits such as medical insurance and retirement plan
payments. |
| 16. |
Identify employees,
calculate the payroll, record the payroll, make payments, submit
forms and reports.
|
