Multiple Choice
The major reporting standard for presenting managerial accounting information is:
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1. Introduction to Accounting
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The Social Security tax rate for an employee remains in effect:
A
for all earnings, regardless of amount
B
until the employee reaches retirement age
C
only for the first month of employment
D
until the employee's earnings reach the annual wage base limit
Verified step by step guidance1
Understand the concept of Social Security tax: Social Security tax is a payroll tax imposed on both employers and employees to fund the Social Security program, which provides benefits for retirees, disabled individuals, and survivors of deceased workers.
Learn about the annual wage base limit: The Social Security tax is applied only to earnings up to a certain limit, known as the annual wage base limit. Earnings above this limit are not subject to Social Security tax.
Clarify the application of the tax rate: The Social Security tax rate remains in effect for an employee's earnings until the annual wage base limit is reached. Once the employee's earnings exceed this limit, no further Social Security tax is deducted for the year.
Recognize the incorrect options: The tax does not apply to all earnings regardless of amount, nor does it stop when the employee reaches retirement age or apply only for the first month of employment. These statements are incorrect.
Conclude with the correct understanding: The correct answer is that the Social Security tax rate remains in effect until the employee's earnings reach the annual wage base limit.
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