Problem Solving Survival Guide to accompany Financial Accounting, 8th Edition

ANALYSIS OF MULTIPLE-CHOICE TYPE QUESTIONS

1. Question

   (L.O. 1) An employee's net pay is determined by gross earnings minus amounts for income tax withholdings,

   1. employee's portion of FICA taxes, and unemployment taxes.
   2. employee's and employer's portion of FICA taxes, and unemployment taxes.
   3. employee's portion of FICA taxes, unemployment taxes, and any voluntary deductions.
   4. employee's portion of FICA taxes, and any voluntary deductions.

   Approach and Explanation: Before you read the answer selections, write down the model for the net pay (take-home pay) computation. Then find the answer selection that agrees with your model.

   Employee's gross earnings for the current period

   - Federal income tax withholdings

   - FICA tax withholdings

   - Withholdings for voluntary deductions such as for charitable contributions, group health and life insurance premiums, savings, retirement fund contributions, and loan repayments

   = Net (or take-home) pay

   (Solution = d.)

2. Question

   (L.O. 2) Which group of items would be recorded in the Payroll Tax Expense account?

   1. Employer's share of FICA taxes, federal unemployment tax, state unemployment tax.
   2. Federal and state income tax withholdings, all FICA taxes, federal unemployment tax, state unemployment tax.
   3. Federal and state income tax withholdings, employer's share of FICA taxes, federal and state unemployment taxes, union dues.
   4. Employer's share of FICA taxes, federal and state unemployment taxes, union dues, insurance premiums, contributions to charitable organizations. ...