SM 2-1 SOLUTIONS MANUAL: CHAPTER 2 END OF CHAPTER ANSWERS ANSWERS TO STOP AND CHECK EXERCISES What’s in the File? 1. A, B, D, E 2. B 3. D 4. A 5. C Who Are You? 1. Student answers will vary. One possible way to prove both identity and employment is a current U.S. passport. Alternatively, a current state-issued driver’s license and a Social Security card will work for the purposes of the I-9. 2. Student answers will vary. When evaluating the earnings of more than one job, the breakdown of includable amount by pay period is often overlooked. 3. Student answers will vary. Examples of statutory employees include: A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products or who picks up and delivers laundry or dry cleaning, if the driver is a single company’s agent or is paid on commission. A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company. An individual who works at home on materials or goods that a company supplies and that must be returned to that company or a designated agent in accordance with furnished specifications for the work to be done. A full-time traveling or city salesperson who works on a single company’s behalf and turns in orders from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for that single company must be the salesperson’s principal business activity. Exempt vs. Nonexempt 1. Exempt workers are exempt from the overtime provisions of FLSA. Exempt workers tend to be employees in a company’s managerial or other leadership functions, in which they may need to work more than 40 hours per week to complete their tasks. Exempt workers usually receive a fixed salary per period that is not based on the number of hours worked. Copyright © 2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-2 Nonexempt workers tend to be compensated on an hourly basis and often do not have managerial or leadership responsibilities. It should be noted that some nonexempt workers do have managerial or leadership responsibilities and may receive a fixed salary; however, these employees are covered by the overtime provisions of FLSA. 2. C (40 hours) 3. The leased employee is a common-law employee of the firm, whereas the temporary employee is an employee of the temporary agency. Worker Facts 1. Hourly workers and nonexempt employees are protected by the FLSA 2. Exempt workers receive a fixed amount of money and generally direct the actions of other employees; nonexempt workers are eligible for overtime and generally have their work directed by a manager. 3. Commission workers are typically tied to sales completed by the individual; piece rate pay is determined by the number of pieces the employee completes during a shift or period. 4. Student answers may vary but should include: Minimum hourly rate is set by the U.S. Federal government. Minimum wage rates can and do vary per state, and different parts of the same state may have different minimum wages. The minimum wage may differ from a “living wage,” which is an amount needed to meet basic subsistence needs. A calculating tool was provided in the chapter for discussion on various location living wages. Who Does Which Job? Student answers will vary. The answer should reflect a clear separation of duties, cross-training, rotation of tasks, and security protocols. Internal Controls and Audits 1. B 2. C Destroy and Terminate 1. Paper payroll records should be shredded or burned. Computer records should be purged from the server and all other storage devices. Copyright © 2022 McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-Hill Education. SM 2-3 2. Charlie should receive his final pay on October 11, and not later than October 12. His employer is not required to provide him with a severance package, although he may be eligible for his accrued vacation pay. ANSWERS TO END-OF-CHAPTER MATERIALS REVIEW QUESTIONS 1. What are necessary elements of internal controls for a payroll department? a. Payroll system design, authorized signers, documentation, and review of the process 2.
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