CPP Practice Exam Quiz 1
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Are you aiming to become a Certified Payroll Professional (CPP)? Gear up for success with our comprehensive CPP Practice Exam! Designed to mirror the actual certification test, this quiz will help you assess your knowledge and readiness to ace the CPP exam. This is a practice quiz to help you prepare for the Certified Payroll Professional certification. The quiz is based on a bank of 25 multiple-choice questions. Questions requiring calculations that change from year to year have been omitted.
Put your knowledge to the test and simulate the time constraints of the actual CPP exam. As you work Read morethrough the quiz, experience the pressure and excitement of the real test, ensuring you're well-prepared to manage your time wisely and confidently. Whether you're a seasoned payroll professional or embarking on a new career path, this practice exam is tailored to your journey. Track your progress, identify strengths, and pinpoint areas for improvement. Invest in your career advancement and take the first step towards CPP certification excellence today!
- 1.
Employee Cindy's employer remits to her payment of $620 in 2009 for substantiated meal expenses she incurred while moving from her old residence to her new work location. What amount of this expense, if any is excluded from Cindy's federal taxable wages?
- A.
$620
- B.
$496
- C.
$310
- D.
$0
Correct Answer
C. $310Explanation
In 2009, Cindy's employer reimbursed her $620 for meal expenses incurred during her move. However, for tax purposes, only 50% of meal expenses (assumed portion) are generally deductible. Therefore, the excluded amount from Cindy's taxable wages would be $310, considering the portion that is not subject to taxation.Rate this question:
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- 2.
Employee Cindy's employer remits to her payment of $620 in 2009 for substantiated meal expenses she incurred while moving from her old residence to her new work location. How should this reimbursement be reported on Cindy's 2009 federal W-2?
- A.
Box 12 only
- B.
Boxes 1 ,3, 5, and 12
- C.
Box 1 only
- D.
Boxes 1, 3, and 5
Correct Answer
D. Boxes 1, 3, and 5Explanation
The reimbursement for substantiated meal expenses should be reported on Cindy's 2009 federal W-2 in Boxes 1, 3, and 5. Box 1 reports the wages, tips, and other compensation, which includes the reimbursement amount. Box 3 reports the Social Security wages, which also includes the reimbursement. Box 5 reports the Medicare wages, which includes the reimbursement as well. This ensures that the reimbursement is properly accounted for and reported for tax purposes.Rate this question:
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- 3.
Technology that allows multiple PC's in different geographical areas to access a single device, such as a check printer is called:
- A.
Surge protection
- B.
Regression testing
- C.
Transaction processing
- D.
Wide area network
Correct Answer
D. Wide area networkExplanation
A wide area network (WAN) is a technology that enables multiple PCs in different geographical areas to access a single device, such as a check printer. A WAN connects multiple local area networks (LANs) over a large geographical area, allowing for the sharing of resources and data between different locations. In this case, the WAN would allow PCs in different areas to connect to the check printer and send print jobs to it remotely.Rate this question:
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- 4.
Which one of the following is most likely an independent contractor?
- A.
A retiree called back to work on a temporary basis.
- B.
A person normally employed in the mail room who comes in after hours to clean the offices.
- C.
A repairman who is called periodically to perform maintenance on the PC's of a dental office.
- D.
A commissioned salesman who works from his home.
Correct Answer
C. A repairman who is called periodically to perform maintenance on the PC's of a dental office.Explanation
An independent contractor is someone who is not an employee but provides services to a client or company on a temporary or project basis. In this scenario, the repairman fits this description as he is called periodically to perform maintenance on the PC's of a dental office. Unlike the retiree who is called back to work temporarily, the person employed in the mail room who cleans the offices after hours, and the commissioned salesman who works from home, the repairman is not a regular employee and is hired specifically for a particular task or service.Rate this question:
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- 5.
The Fair Labor Standards Act specifically governs which of the following?
- A.
When severance pay must be paid
- B.
How vacation pay is accrued
- C.
Record keeping requirements
- D.
When holiday pay must be provided
Correct Answer
C. Record keeping requirementsExplanation
The Fair Labor Standards Act (FLSA) specifically governs record keeping requirements. This means that employers are required to keep accurate records of their employees' wages, hours worked, and other important information. This is important for ensuring that employees are being paid correctly and for enforcing other provisions of the FLSA, such as minimum wage and overtime requirements. The FLSA does not specifically address severance pay, vacation pay, or holiday pay, although it may have some implications for these areas indirectly.Rate this question:
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- 6.
An environment in which the back office transaction-intensive processes and customer care functions are consolidated is known as:
- A.
Outsourcing
- B.
Pre-processing
- C.
Open systems
- D.
Shared services
Correct Answer
D. Shared servicesExplanation
Shared services refers to a business model where back office transaction-intensive processes and customer care functions are consolidated into one central unit. This allows for increased efficiency, cost savings, and improved quality of service. By sharing resources and standardizing processes, organizations can streamline operations and provide better support to both internal and external customers. This model is commonly used in industries such as finance, human resources, IT, and procurement.Rate this question:
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- 7.
Nice Guys Inc. has a short-term disability plan, provided by a third-party insurance company, for its factory workers. Employees do not pay for this benefit. Roberta received $400 a month for four months during the six-month coverage period. How did the third-party payer tax Roberta's disability payments?
- A.
No tax was withheld on any payments
- B.
Social Security and Medicare taxes were withheld on $400 in each of the four months.
- C.
Federal Income tax was withheld on $400 in each of the four months
- D.
Social Security and Medicare taxes were withheld on the value of the premium paid by the employer
Correct Answer
B. Social Security and Medicare taxes were withheld on $400 in each of the four months.Explanation
The third-party payer withheld Social Security and Medicare taxes on $400 in each of the four months because disability payments are subject to these taxes.Rate this question:
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- 8.
Which of the following does not meet the federal definition of supplemental wages?
- A.
Commissions
- B.
Certain stock awards
- C.
Paid sick leave
- D.
Holiday pay
Correct Answer
D. Holiday payExplanation
Holiday pay does not meet the federal definition of supplemental wages because it is not considered an additional payment for work performed or services rendered. Supplemental wages are typically payments made to employees that are not regular wages, such as bonuses, commissions, or stock awards. Holiday pay, on the other hand, is a form of regular wages that is paid to employees for time not worked during designated holidays.Rate this question:
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- 9.
Which of the following is not delegated to others?
- A.
Accountability
- B.
Authority
- C.
Responsibility
- D.
Ability
Correct Answer
A. AccountabilityExplanation
Accountability is not delegated to others because it is the obligation to take responsibility for one's actions and decisions. It cannot be transferred or assigned to someone else. While authority, responsibility, and ability can be delegated to others, accountability remains with the individual who is ultimately responsible for the outcome or consequences of their actions.Rate this question:
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- 10.
Which of the following is an example of a system production control technique?
- A.
External auditors verify payroll account balances prior to commenting on financial statements
- B.
Cut-off dates for data entry are established with remote users
- C.
Payroll department members change their passwords each week
- D.
Check stock is maintained under lock and key
Correct Answer
B. Cut-off dates for data entry are established with remote usersExplanation
Cut-off dates for data entry are established with remote users is an example of a system production control technique because it ensures that data is entered within a specific timeframe, allowing for timely and accurate processing. By setting cut-off dates, the organization can prevent delays in data entry and ensure that all necessary information is captured in a timely manner. This technique helps in maintaining the efficiency and effectiveness of the production process by establishing clear guidelines for data entry.Rate this question:
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- 11.
If an employee working abroad with a tax home in a foreign country passes the "physical presence test," to what may the employee be eligible?
- A.
Income exclusions
- B.
Employer-paid housing expenses
- C.
Foreign service premium
- D.
Hardship allowance
Correct Answer
A. Income exclusionsExplanation
If an employee working abroad with a tax home in a foreign country passes the "physical presence test," they may be eligible for income exclusions. This means that they may be able to exclude a certain amount of their foreign earned income from their taxable income in the United States. This can help reduce their overall tax liability.Rate this question:
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- 12.
The Fair Labor Standards Act permits compensatory time off in lieu of overtime pay to which of the following employees?
- A.
Salespeople who work out of their homes
- B.
High school students who work over 8 hours in a day
- C.
Municipal firefighters
- D.
Retirees who return for part-time work
Correct Answer
C. Municipal firefightersExplanation
The Fair Labor Standards Act permits compensatory time off in lieu of overtime pay to municipal firefighters. This means that instead of receiving overtime pay for working more than the standard hours, firefighters can accumulate additional time off that can be used at a later date. This is allowed because firefighters often work irregular schedules and may be required to work longer hours during emergencies.Rate this question:
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- 13.
The FLSA requires which of the following records to be retained for three years?
- A.
Daily time records
- B.
Proof of workers' compensation coverage
- C.
Employee disciplinary notices
- D.
Document showing employee's job duties
Correct Answer
D. Document showing employee's job dutiesExplanation
The FLSA (Fair Labor Standards Act) requires employers to retain records showing employee's job duties for three years. This is important for ensuring compliance with the Act, as it helps to determine whether employees are classified correctly and receiving the appropriate wages and benefits. By retaining these records, employers can demonstrate that they have accurately assessed and assigned job duties, which can be useful in case of any disputes or audits.Rate this question:
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- 14.
Which of the following employers are exempt from the provisions of IRCA?
- A.
Employers with annual revenues under $10,000
- B.
Employers with less than 2 employees
- C.
All employers are subject to compliance
- D.
Privately held employers
Correct Answer
C. All employers are subject to complianceExplanation
The correct answer is "All employers are subject to compliance." This means that none of the employers listed in the options are exempt from the provisions of IRCA. Regardless of their annual revenues or the number of employees, all employers are required to comply with the provisions of IRCA.Rate this question:
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- 15.
In maintaining a payroll system, change control refers to:
- A.
Entering new data to an employee's record
- B.
Procedures to test and schedule changes before they are put into production
- C.
Creating a new system in a merger or acquisition
- D.
Separation of functions according to accounting standards
Correct Answer
B. Procedures to test and schedule changes before they are put into productionExplanation
Change control in maintaining a payroll system refers to the procedures that are followed to test and schedule changes before they are implemented or put into production. This ensures that any changes made to the system, such as updates or modifications, are thoroughly tested and verified before being applied to the live environment. By following change control procedures, the risk of introducing errors or disruptions to the payroll system is minimized, ensuring the system remains accurate and reliable.Rate this question:
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- 16.
What document reflects the value of the assets of a corporation?
- A.
Profit/loss statement
- B.
Income statement
- C.
Balance sheet
- D.
Variance analysis
Correct Answer
C. Balance sheetExplanation
A balance sheet reflects the value of the assets of a corporation. It provides a snapshot of a company's financial position at a specific point in time, showing the company's assets, liabilities, and shareholders' equity. It is an important financial statement that helps investors, creditors, and other stakeholders assess the financial health and stability of a company. The balance sheet includes various categories of assets, such as cash, accounts receivable, inventory, property, and equipment, which collectively represent the value of the company's resources.Rate this question:
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- 17.
An example of procedure is:
- A.
Overtime is paid at double time for work performed on Sundays
- B.
Employees may take unused vacation from the current year in the first quarter of the subsequent year
- C.
Time cards are filed by the cost center in the records room
- D.
Employees receive their hourly rate of pay for hours spent in jury service
Correct Answer
C. Time cards are filed by the cost center in the records roomExplanation
The statement "Time cards are filed by the cost center in the records room" is an example of a procedure because it describes a specific action or process that is followed in the organization. It outlines how time cards are handled and where they are filed, indicating a step-by-step approach to managing this task. This statement demonstrates a clear and defined procedure within the workplace.Rate this question:
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- 18.
Use of which of the following contributes to the security of the payroll system?
- A.
Accountable plan
- B.
Diplomatic leadership
- C.
User password
- D.
Direct deposit
Correct Answer
C. User passwordExplanation
A user password contributes to the security of the payroll system by providing a level of authentication and access control. It ensures that only authorized individuals can access the system and make changes to payroll information. By requiring users to enter a unique password, it helps to prevent unauthorized access, data breaches, and potential fraud. This helps to protect sensitive payroll data and maintain the integrity and confidentiality of the system.Rate this question:
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- 19.
Which of the following is tax-free to all employees even if only provided to highly paid employees?
- A.
Cafeteria plans
- B.
401(k) plans
- C.
Transportation fringe benefits
- D.
Athletic facilities
Correct Answer
C. Transportation fringe benefitsExplanation
Transportation fringe benefits are tax-free to all employees, regardless of their income level. This means that even if these benefits are only provided to highly paid employees, they are still exempt from taxes for all employees. This can include benefits such as employer-provided parking, transit passes, or commuter highway vehicle transportation. The tax-free status of transportation fringe benefits is intended to encourage the use of public transportation and reduce traffic congestion.Rate this question:
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- 20.
A salaried-exempt executive employee is unable to work for two days in the work week because the office is closed for remodeling. The employee's weekly guaranteed salary is $500. Under FLSA what amount must this employee be paid for the work week?
- A.
$500
- B.
$300
- C.
$400
- D.
$200
Correct Answer
A. $500Explanation
The correct answer is $500. According to the FLSA (Fair Labor Standards Act), exempt employees must be paid their full salary for any workweek in which they perform any work, regardless of the number of hours worked. In this case, even though the employee was unable to work for two days due to office remodeling, they are still entitled to their full weekly salary of $500.Rate this question:
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- 21.
When making the federal payroll tax deposit, the accounting entry to record an advance payment of EIC would be:
- A.
Debit cash, credit EIC payable
- B.
Debit EIC payable, credit cash
- C.
Debit FIT payable, credit cash
- D.
Debit EIC payable, credit FICA payable
Correct Answer
B. Debit EIC payable, credit cashExplanation
When making a federal payroll tax deposit, an advance payment of Earned Income Credit (EIC) is recorded by debiting EIC payable to recognize the liability and crediting cash to reflect the payment. This entry ensures accurate accounting of the advance payment for tax reporting purposes.Rate this question:
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- 22.
At the time that wages are paid, an advance payment of EIC would be recorded as:
- A.
Debit cash, credit EIC payable
- B.
Debit EIC payable, credit cash
- C.
Debit FIT payable, credit cash
- D.
Debit EIC payable, credit FICA payable
Correct Answer
B. Debit EIC payable, credit cashExplanation
When an advance payment of Earned Income Credit (EIC) is made, it is recorded as a liability called EIC payable. This liability represents the amount that the company owes to the employee as an advance on their EIC. Since cash is being paid out, it is debited, and since the EIC payable liability is being increased, it is credited. Therefore, the correct entry would be to debit EIC payable and credit cash.Rate this question:
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- 23.
A single company of a group of related companies can file the Forms W-2 and 941 under it's EIN for all employees of all the related companies, whether or not the employees are concurrently employed, under which of the following reporting options?
- A.
Common paymaster
- B.
Power of attorney
- C.
Reporting agent
- D.
Establishment reporting
Correct Answer
C. Reporting agentExplanation
A reporting agent is a third-party entity that is authorized to file tax forms on behalf of another company. In this scenario, a single company within a group of related companies can appoint a reporting agent to file the Forms W-2 and 941 under its own Employer Identification Number (EIN) for all employees of all the related companies. This means that the reporting agent will handle the tax reporting responsibilities for all the related companies, regardless of whether the employees are concurrently employed or not.Rate this question:
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- 24.
How many hours prior to payday is it recommended that a direct deposit of wages be initiated with the ODFI?
- A.
24 hours
- B.
72 hours
- C.
8 hours
- D.
48 hours
Correct Answer
D. 48 hoursExplanation
When initiating a direct deposit of wages with the ODFI (Originating Depository Financial Institution), it is recommended to do so 48 hours prior to payday. This allows enough time for the ODFI to process the transaction and ensure that the funds are deposited into the recipient's account before payday. Initiating the direct deposit 48 hours in advance helps to avoid any delays or issues that may arise during the processing of the transaction.Rate this question:
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- 25.
Under the existing NACHA rules, amounts transmitted to the RDFI by 5:00 p.m. the day before payday must be posted to employees' accounts no later than:
- A.
The end of the business day on payday
- B.
The opening of the business day on payday
- C.
The evening before payday
- D.
Two days before payday
Correct Answer
B. The opening of the business day on paydayExplanation
Under the existing NACHA rules, amounts transmitted to the RDFI by 5:00 p.m. the day before payday must be posted to employees' accounts no later than the opening of the business day on payday. This means that the funds should be available in the employees' accounts at the start of the business day on payday, allowing them to access their money as soon as possible.Rate this question:
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Feb 19, 2024Quiz Edited by
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Aug 12, 2011Quiz Created by
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