26) Art Parrish, the sole employee of Parrish Sales, has gross salary for March of $4,000. The entire amount is under the OASDI limit of $106,800 and thus subject to FICA. He is also subject to federal income tax at a rate of 18%. His year-to-date pay has already exceeded the $7,000 cap for FUTA and SUTA. The fifth journal entry in the payroll cycle to record the payment by the company of the tax liability to the government includes a credit to cash for $1,332.
27) Which of the following is an important aspect of control over payroll?
A) Controls to limit salaries and wages so that they are no higher than competitors
B) Controls for efficiency in payroll procedures
C) Controls to screen potential employees for criminal records
D) Controls to monitor employee behavior, such as security cameras
28) Which of the following is a reason that many companies maintain two payroll bank accounts?
A) To avoid writing a paycheck to a fictitious person.
B) To prove an employee's hours worked.
C) To separate the duties of human resources personnel and accounting personnel.
D) To make bank reconciliations simpler.
29) Which of the following is a reason that many companies require a photo ID when employees pick up their paychecks?
A) To make sure an employee's work hours have been accurately reported
B) To avoid writing a paycheck to a fictitious person
C) To improve efficiency of the payroll disbursement process
D) To make sure all employees are legal adults
30) Good internal controls over payroll would include all of the following EXCEPT:
A) accounting for payroll should be separate from hiring and firing of employees.
B) disbursement of paychecks should be separate from the function of maintaining payroll records.
C) employees should clock in and out to insure accuracy of work hours.
D) cash receipts from customers should be separated from the accounting for accounts receivable.
31) Which of the following is a major control risk in the payroll area?
A) Theft of inventory by staff
B) Fictitious persons cashing paychecks
C) Expenses being recorded as assets in order to manipulate earnings
D) Contracts being awarded to relatives of employees
32) Which of the following is a control procedure to prevent fictitious persons cashing paychecks?
A) Having employees clock in and out of work
B) Keeping computerized records of payroll data
C) Serial numbering of paychecks
D) Requiring photo IDs for employees picking up their paychecks
33) Which of the following is an important internal control over payroll?
A) Separating the duties of the disbursement of paychecks from the recording of payroll transactions in the ledger
B) Separating the duties of safeguarding property from record-keeping of property
C) Separating the duties of approving invoices from signing disbursement checks
D) Separating the duties of cash disbursement from bank reconciliations
34) The Statewide Sales Company has gross pay for March of $45,000. Please provide the first journal entry in the payroll cycle to record salary expense.