College Accounting Study Set 7

Business

Quiz 11 :

Payroll Taxes, Deposits, and Reports

Quiz 11 :

Payroll Taxes, Deposits, and Reports

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Computing and recording employer's payroll tax expense. The payroll register of Total Garden Care showed total employee earnings of $3,500 for the payroll period ended July 14, 2013. INSTRUCTIONS 1. Compute the employer's payroll taxes for the period. Use rates of 6.2 percent for the employer's share of the social security tax, 1.45 percent for Medicare tax, 0.8 percent for FUTA tax, and 5.4 percent for SUTA tax. All earnings are taxable. 2. Prepare a general journal entry to record the employer's payroll taxes for the period. Use journal page 30. Analyze: Which of the above taxes are paid by the employee and matched by the employer?
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2.
The general journal entry to record the employer's payroll taxes for the period ending July 14, 2013 is as follows:
In the books of T Garden Care GENERAL JOURNAL PAGE _30_
img Both Social Security Tax and Medicare tax are withheld from the employees' earnings and are matched by employer's contribution. FUTA tax and SUTA tax are only paid by employer.

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The Home Depot, Inc. reported the following data in its 2009 Annual Report (for the fiscal year ended January 31, 2010) : img Analyze: Based on the data above, how many employees were employed full-time at January 31, 2010?
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HD Inc. furnished the following data:
Number of employees at January 31, 2010 = 317,000
Percentage of employees employed full time = 61%
Therefore, the number of employees working full time =
img

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What is EFTPS? When is EFTPS required?
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EFTPS:
EFTPS stands for Electronic Federal Tax Payment System which is used to make all federal tax deposits for electronic fund transfers using a telephone or a computer. It is a free service provided by the Department of Treasury of US.
An employer can arrange his tax professional or a financial institution to make electronic deposits on their behalf if he does not want to pay taxes through EFTPS. The employer may also arrange for his financial institution to initiate a same day wire payment on his behalf.
Previously, Electronic Federal Tax Payment System was only used if the total annual tax liability or federal tax deposits of the employer are more than $200,000. Employers who are asked to make electronic deposits and do not follow are subject to 10 percent penalty.
But now, effective for tax payments after January 1, 2011, each and every employer, who has to pay federal tax deposit are required to pay through Electronic Federal Tax Payment System only.

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Davis Company recently discovered that a payroll clerk had issued checks to nonexistent employees for several years and cashed the checks himself. The firm does not have any internal control procedures for its payroll operations. What specific controls might have led to the discovery of this fraud more quickly or discouraged the payroll clerk from even attempting the fraud?
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Computing employer's social security tax, Medicare tax, and unemployment taxes. A payroll summary for Fronke Consulting Company, owned by Mark Fronke, for the quarter ending June 30, 2013, appears on page 362. The firm prepared the required tax deposit forms and issued checks as follows: a. Federal Tax Deposit Coupon, Form 8109, check for April taxes, paid on May 15. b. Federal Tax Deposit Coupon, Form 8109, check for May taxes, paid on June 17. img INSTRUCTIONS 1. Using the tax rates given below, and assuming that all earnings are taxable, make the general journal entry on April 8, 2013, to record the employer's payroll tax expense on the payroll ending that date. Use journal page 12. img 2. Prepare the entries in general journal form to record deposit of the employee income tax withheld and the social security and Medicare taxes (employee and employer shares) on May 15 for April taxes and on June 17 for May taxes. Analyze: How were the amounts for Income Tax Withheld determined?
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This is a continuation of Problem 11.2A for Fronke Consulting Company; recording payment of taxes and preparing employer's quarterly federal tax return. 1. On July 15, the firm issued a check to deposit the federal income tax withheld and the FICA tax (both employee and employer shares for the third month [June]). Based on your computations in Problem 11.2A, record the issuance of the check in general journal form. Use journal page 24. 2. Complete Form 941 in accordance with the discussions in this chapter. Use a 12.4 percent social security rate and a 2.9 percent Medicare rate in computations. Use the following address for the company: 2300 East Ocean Blvd., Long Beach, CA 90802. Use 75-4444444 as the employer identification number. Date the return July 31, 2013. Mr. Fronke's phone number is 562-709-3654. Analyze: Based on the entries that you have recorded, what is the balance of the Employee Income Tax Payable account at July 15?
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Recording deposit of social security, Medicare, and income taxes. After Beam Corporation paid its employees on July 15, 2013, and recorded the corporation's share of payroll taxes for the payroll paid that date, the firm's general ledger showed a balance of $19,700 in the Social Security Tax Payable account, a balance of $4,196 in the Medicare Tax Payable account, and a balance of $18,260 in the Employee Income Tax Payable account. On July 16, the business issued a check to deposit the taxes owed in the First Texas Bank. Record this transaction in general journal form. Use 24 as the page number for the general journal.
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Determining Employee Status In each of the following independent situations, decide whether the business organization should treat the person being paid as an employee and should withhold social security, Medicare, and employee income taxes from the payment made. 1. Tony Jacobs owns and operates a crafts shop, as a sole proprietor. Jacobs withdraws $2,000 a week from the crafts shop. 2. Guy Gagliardi is a court reporter. He has an office at the Metroplex Court Reporting Center but pays no rent. The manager of the center receives requests from attorneys for court reporters to take depositions at legal hearings. The manager then chooses a court reporter who best meets the needs of the client and contacts the court reporter chosen. The court reporter has the right to refuse to take on the job, and the court reporter controls his or her working hours and days. Clients make payments to the center, which deducts a 30 percent fee for providing facilities and rendering services to support the court reporter. The balance is paid to the court reporter. During the current month, the center collected fees of $30,000 for Guy, deducted $7,500 for the center's fee, and remitted the remainder to Guy. 3. Ken, a registered nurse, has retired from full-time work. However, because of his experience and special skills, on each Monday, Wednesday, and Thursday afternoon he assists Dr. Grace Liu, a dermatologist. Ken is paid an hourly fee by Dr. Liu. During the current week, his hourly fees totaled $800. 4. After working several years as an editor for a magazine publisher, Lisa quit her job to stay at home with her two small children. Later, the publisher asked her to work in her home performing editorial work as needed. Lisa is paid an hourly fee for the work she performs. In some cases, she goes to the publishing company's offices to pick up or return a manuscript. In other cases the firm sends a manuscript to her, or she returns one by mail. During the current month, Lisa's hourly earnings totaled $2,500. 5. Investor Corporation carries on very little business activity. It merely holds land and certain assets. The board of directors has concluded that they need no employees. They have decided instead to pay Ron Christie, one of the shareholders, a consulting fee of $20,000 per year to serve as president, secretary, and treasurer and to manage all the affairs of the company. Christie spends an average of one hour per week on the corporation's business affairs. However, his fee is fixed regardless of how few or how many hours he works. Analyze: What characteristics do the persons you identified as "employees" have in common?
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Depositing federal unemployment tax. On March 31, 2013, the Federal Unemployment Tax Payable account in the general ledger of The Argosy Company showed a balance of $1,497. This represents the FUTA tax owed for the first quarter of the year. On April 30, 2013, the firm issued a check to deposit the amount owed in the First Security National Bank. Record this transaction in general journal form. Use 14 as the page number for the general journal.
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What does "monthly" refer to in the Monthly Deposit Schedule Rule?
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What is the significance to management of the experience rating system used to determine the employer's tax under the state unemployment insurance laws?
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Computing employer's social security tax, Medicare tax, and unemployment taxes. A payroll summary for Styles for Less, owned by Nikki Parikh, for the quarter ending September 30, 2013, appears below. The business prepared the tax deposit forms and issued checks as follows during the quarter: a. Federal Tax Deposit Coupon, Form 8109, check for July taxes, paid on August 15. b. Federal Tax Deposit Coupon, Form 8109, check for August taxes, paid on September 15. img INSTRUCTIONS 1. Prepare the general journal entry on July 7, 2013, to record the employer's payroll tax expense on the payroll ending that date. Use journal page 31. All earnings are subject to the following taxes: img 2. Make the entries in general journal form to record deposit of the employee income tax withheld and the social security and Medicare taxes (both employees' withholding and employer's matching portion) on August 15 for July taxes and on September 15 for the August taxes. Analyze: How much would a SUTA rate of 1.5 percent reduce the tax for the payroll of July 7?
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Which of the following are withheld from employees' earnings? a. FUTA b. income tax c. Medicare d. social security e. SUTA f. workers' compensation
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Computing employer's payroll taxes. At the end of the weekly payroll period on June 30, 2013, the payroll register of Cordts Consultants showed employee earnings of $70,900. Determine the firm's payroll taxes for the period. Use a social security rate of 6.2 percent, Medicare rate of 1.45 percent, FUTA rate of 0.8 percent, and SUTA rate of 5.4 percent. Consider all earnings subject to social security tax and Medicare tax and $40,850 subject to FUTA and SUTA taxes.
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What does "semiweekly" refer to in the Semiweekly Deposit Schedule Rule?
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Johnson Company has 20 employees. Some employees work in the office, others in the warehouse, and still others in the retail store. In the company's records, all employees are simply referred to as "general employees." Explain to management why this is not an acceptable practice.
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Depositing payroll taxes. The amounts of employee income tax withheld and social security and Medicare taxes (both employee and employer shares) shown below were owed by different businesses on the specified dates. In each case, decide whether the firm is required to deposit the sum in an authorized financial institution. If a deposit is necessary, give the date by which it should be made. The employers are monthly depositors. 1. Total taxes of $550 owed on July 31, 2013. 2. Total taxes of $1,650 owed on April 30, 2013. 3. Total taxes of $1,200 owed on March 31, 2013. 4. Total taxes of $8,750 owed on February 28, 2013.
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The Home Depot, Inc. reported the following data in its 2009 Annual Report (for the fiscal year ended January 31, 2010) : img Analyze: Assume only full-time employees receive contributions to their retirement plan. What was the average retirement plan contribution made by The Home Depot for full-time employees?
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Why should management be concerned about the accuracy and promptness of payroll tax deposits and payroll tax returns?
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Computing and recording employer's payroll tax expense. The payroll register of Cliff's Auto Detailers showed total employee earnings of $4,000 for the week ended April 8, 2013. INSTRUCTIONS 1. Compute the employer's payroll taxes for the period. The tax rates are as follows: img 2. Prepare a general journal entry to record the employer's payroll taxes for the period. Use journal page 28. Analyze: If the FUTA tax rate had been 1.2 percent, what total employer payroll taxes would have been recorded?
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