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Here are some possible case-study multiple choice
questions on payroll accounting. Each question has four
options and the correct answer is marked with an asterisk
(*). The rationales for the answers are also provided.
1. A company pays its employees on a biweekly basis. The
pay period ends on Friday, December 31, 2026, and the
paychecks are distributed on Wednesday, January 5, 2026.
How should the company record the payroll expense and
liability for the pay period?
a) Debit payroll expense and credit cash on December 31,
2026.
b) Debit payroll expense and credit cash on January 5,
2026.
c) Debit payroll expense and credit payroll liability on
December 31, 2026, and debit payroll liability and credit
cash on January 5, 2026.*
d) Debit payroll expense and credit payroll liability on
January 5, 2026.
Rationale: The company should record the payroll expense
and liability in the same period that the employees
performed the work, regardless of when they are paid.
Therefore, option c is correct.
2. A company has a defined benefit pension plan for its
employees. The company's actuary estimates that the
present value of the future benefits earned by the
employees in 2026 is $500,000. The company contributes
$400,000 to the pension fund in 2026 and the return
on the pension fund assets is $50,000. The company'sÂÂ
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