1. What programs are funded by the FICA (Federal Insurance Contributions Act) tax?
2. For each of the following payroll-related taxes, indicate whether it generally applies to (a) employees only, (b) employers only, (c) both employees and employers:
1. Social Security tax
2. Medicare tax
3. Federal income tax
4. Federal unemployment compensation tax
5. State unemployment compensation tax
3. To match revenues and expenses properly, should the expense for employee vacation pay be recorded in the pe- riod during which the vacation privilege is earned or during the period in which the vacation is taken? Discuss.
4. What is interest? How does simple interest differ from compound interest?
5. What key characteristics define an annuity? What is the present value of a $500, three-year annuity, where the first payment is received one year from today and the rel- evant interest rate is 8%? Use the present value tables in Appendix A.
6. What is discounting?
7. Bill expects to receive $3,000 from his grandfather when he graduates from college three years from today. What is the present value of the $3,000 if the relevant interest rate is 6% compounded anually?