Answer the following statements true (T) or false (F)

Question

1. Gross pay is the total amount of compensation earned by an employee after the deductions are
made.
2. Net pay is the total amount of compensation that an employee takes home after the deductions are
made.
3. The employer is required to directly deposit the employee's take-home pay into the employee's bank
account.
4. The old age, survivors, and disability insurance component of FICA tax is imposed on the entire
amount of an individual employee's earnings.
5. All earnings are subject to Medicare tax.

Answer 1

1. False - Net pay is the total amount of compensation that an employee takes home after the
deductions are made.
2. True
3. False -The employer either writes a paycheck to each employee for his or her take-home pay or
directly deposits the employee's take-home pay into the employee's bank account.
4. False - The amount of tax withheld varies from year to year because the wage base subject to
OASDI tax changes each year.
5. True