CPP Practice Exam 12

1. One element of a payroll calander is:

Pay frequency

Hire dates

Total remuneration

Social security numbers

Pay frequency refers to the frequency at which employees are paid, such as weekly, bi-weekly, or monthly. It is an important element of a payroll calendar as it determines when employees can expect to receive their wages. The pay frequency can vary depending on the company's policies and the employment laws of the country or state.

Explanation

Pay frequency refers to the frequency at which employees are paid, such as weekly, bi-weekly, or monthly. It is an important element of a payroll calendar as it determines when employees can expect to receive their wages. The pay frequency can vary depending on the company's policies and the employment laws of the country or state.

2. All of the following actions demonstrate a strong customer service orientation EXCEPT:

Exhibiting a customer friendly attitude

Viewing customers as the most important part of the job

Using voice mail to answer phone calls from customers

Establishing relationships with people

Using voice mail to answer phone calls from customers does not demonstrate a strong customer service orientation because it lacks personal interaction and may lead to a delay in addressing customer needs. The other actions mentioned, such as exhibiting a customer-friendly attitude, viewing customers as the most important part of the job, and establishing relationships with people, all indicate a focus on providing excellent customer service.

Explanation

Using voice mail to answer phone calls from customers does not demonstrate a strong customer service orientation because it lacks personal interaction and may lead to a delay in addressing customer needs. The other actions mentioned, such as exhibiting a customer-friendly attitude, viewing customers as the most important part of the job, and establishing relationships with people, all indicate a focus on providing excellent customer service.

3. The Family and Medical Leave Act requires employers to maintain records for:

12 weeks

1 year

2 years

3 years

The Family and Medical Leave Act requires employers to maintain records for a period of 3 years. This means that employers must keep records of any leave taken by employees for family or medical reasons, including the dates of the leave and the reasons for it, for a minimum of 3 years. This requirement ensures that employers have accurate and up-to-date records of their employees' leave history, which can be helpful for both the employer and the employee in case of any disputes or inquiries in the future.

Explanation

The Family and Medical Leave Act requires employers to maintain records for a period of 3 years. This means that employers must keep records of any leave taken by employees for family or medical reasons, including the dates of the leave and the reasons for it, for a minimum of 3 years. This requirement ensures that employers have accurate and up-to-date records of their employees' leave history, which can be helpful for both the employer and the employee in case of any disputes or inquiries in the future.

4. An employee who works for more than one employer and has exceeded the social security wage base may:

Take a credit against federal income tax on Form 1040

Demand that the employer refund the overage

Apply the social security tax to next year's withholdings

Apply the overage to benefits paid at age 65

If an employee works for more than one employer and exceeds the social security wage base, they may take a credit against federal income tax on Form 1040. This means that they can reduce their federal income tax liability by the amount of excess social security taxes paid. This credit can help offset the additional taxes paid due to exceeding the wage base.

Explanation

If an employee works for more than one employer and exceeds the social security wage base, they may take a credit against federal income tax on Form 1040. This means that they can reduce their federal income tax liability by the amount of excess social security taxes paid. This credit can help offset the additional taxes paid due to exceeding the wage base.

5. What is the purpose of the payroll accrual entry?

To recognize expenses in the period in which they were incurred

To reverse an entry made in error

To recognize expenses in the period in which they were paid

To reverse an entry from a previous period

The purpose of the payroll accrual entry is to recognize expenses in the period in which they were incurred. This means that the entry is made to account for the expenses related to employee salaries and wages that have been earned but not yet paid. By recognizing these expenses in the correct period, it ensures that the financial statements accurately reflect the company's financial position and performance during that period.

Explanation

The purpose of the payroll accrual entry is to recognize expenses in the period in which they were incurred. This means that the entry is made to account for the expenses related to employee salaries and wages that have been earned but not yet paid. By recognizing these expenses in the correct period, it ensures that the financial statements accurately reflect the company's financial position and performance during that period.

6. When an employer is advised by the IRS that an employee's Form W-4 is invalid, what action must the employer take?

All further Forms W-4 must be sent to the IRS as long as the employee is being paid

Employers have no obligation to change exemptions unless notified by the employee through a new Form W-4

Withhold on the basis of information provided by the IRS

When an employer is advised by the IRS that an employee's Form W-4 is invalid, the employer must withhold taxes based on the information provided by the IRS. This means that the employer should adjust the employee's withholding amount according to the guidance given by the IRS. The employer is required to follow the instructions provided by the IRS in order to comply with tax regulations.

Explanation

When an employer is advised by the IRS that an employee's Form W-4 is invalid, the employer must withhold taxes based on the information provided by the IRS. This means that the employer should adjust the employee's withholding amount according to the guidance given by the IRS. The employer is required to follow the instructions provided by the IRS in order to comply with tax regulations.

7. When checking for phantom employees, which of the following actions should be taken?

Notify the employees of an impending physical payout

Have the managers hand checks out to their employees

Have employees pick up checks and direct deposit advices and show identification

Mail checks directly to employee's homes

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Explanation

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8. Which of the following steps is LEAST important during the parallel testing phase of a new payroll system?

The testing of employee earnings and deductions accuracy

The verification of employees transferred to the new system from the old system

The verification of tax withholding calculations for employees

Testing the functionality of a wage attachment process

During the parallel testing phase of a new payroll system, the least important step is testing the functionality of a wage attachment process. This is because a wage attachment process is typically a less common scenario compared to other payroll functions such as employee earnings and deductions accuracy, verification of employee transfers, and tax withholding calculations. Therefore, while it is still important to test the functionality of a wage attachment process, it is considered to be of lesser importance compared to other critical payroll functions.

Explanation

During the parallel testing phase of a new payroll system, the least important step is testing the functionality of a wage attachment process. This is because a wage attachment process is typically a less common scenario compared to other payroll functions such as employee earnings and deductions accuracy, verification of employee transfers, and tax withholding calculations. Therefore, while it is still important to test the functionality of a wage attachment process, it is considered to be of lesser importance compared to other critical payroll functions.

9. An employee is paid $9 per hour plus a 10% differential for evening shifts. During the past week, the employee worked 24 hours on the day shift and 24 hours on the evening shift. Under FLSA, what are the employee's gross wages for the week?

$378.00

$432.00

$572.40

$453.60

Overtime typically applies when an employee works more than 40 hours in a workweek under the Fair Labor Standards Act (FLSA). In the scenario you provided, the employee worked a total of 48 hours (24 hours on the day shift and 24 hours on the evening shift), which is more than 40 hours. Therefore, 8 of these hours are considered overtime hours.

To calculate the gross wages with overtime, we need to consider the overtime rate, which is usually 1.5 times the regular rate for each overtime hour.

Here's the corrected calculation:

For the day shift:

The employee worked 24 hours at a rate of $9 per hour.

Gross wages for the day shift = 24 hours * $9/hour = $216

For the evening shift:

The employee worked 24 hours at a rate of $9 per hour, plus a 10% differential for evening shifts.

Differential for evening shift = 10% of $9 = 0.10 * $9 = $0.90 per hour

Gross wages for the evening shift = 24 hours * ($9 + $0.90)/hour = 24 hours * $9.90/hour = $237.60

Now, for the 8 overtime hours on the evening shift:

The overtime rate is 1.5 times the regular rate, so it's 1.5 * $9.90/hour = $14.85/hour

Gross wages for overtime = 8 hours * $14.85/hour = $118.80

Total gross wages with overtime = Gross wages for day shift + Gross wages for evening shift (excluding overtime) + Gross wages for overtime Total gross wages = $216 + $237.60 + $118.80 = $572.40

So, accounting for overtime, the employee's gross wages for the week are $572.40.

Explanation

Overtime typically applies when an employee works more than 40 hours in a workweek under the Fair Labor Standards Act (FLSA). In the scenario you provided, the employee worked a total of 48 hours (24 hours on the day shift and 24 hours on the evening shift), which is more than 40 hours. Therefore, 8 of these hours are considered overtime hours.

To calculate the gross wages with overtime, we need to consider the overtime rate, which is usually 1.5 times the regular rate for each overtime hour.

Here's the corrected calculation:

For the day shift:

The employee worked 24 hours at a rate of $9 per hour.

Gross wages for the day shift = 24 hours * $9/hour = $216

For the evening shift:

The employee worked 24 hours at a rate of $9 per hour, plus a 10% differential for evening shifts.

Differential for evening shift = 10% of $9 = 0.10 * $9 = $0.90 per hour

Gross wages for the evening shift = 24 hours * ($9 + $0.90)/hour = 24 hours * $9.90/hour = $237.60

Now, for the 8 overtime hours on the evening shift:

The overtime rate is 1.5 times the regular rate, so it's 1.5 * $9.90/hour = $14.85/hour

Gross wages for overtime = 8 hours * $14.85/hour = $118.80

Total gross wages with overtime = Gross wages for day shift + Gross wages for evening shift (excluding overtime) + Gross wages for overtime Total gross wages = $216 + $237.60 + $118.80 = $572.40

So, accounting for overtime, the employee's gross wages for the week are $572.40.

10. A nonexempt employee earns $400 per week for a normal schedule of 35 hours. Under FLSA, how mjuch would this employee be due if 48 hours were worked?

$400.00

$594.40

$548.64

$433.32

The correct answer is $594.40. To calculate the amount due, we need to determine the employee's regular rate of pay. The regular rate is calculated by dividing the total weekly pay by the total number of hours worked. In this case, the employee earns $400 per week for 35 hours, so the regular rate is $400/35 = $11.43 per hour.

Since the employee worked 48 hours, we need to calculate overtime pay. Overtime pay is 1.5 times the regular rate for any hours worked over 40. In this case, the employee worked 8 hours of overtime (48 - 40 = 8). So, the overtime pay is 8 x $11.43 x 1.5 = $137.16.

Adding the overtime pay to the regular pay, the total amount due is $400 + $137.16 = $537.16.

However, since the FLSA requires that overtime pay be calculated based on the regular rate, we need to multiply the overtime pay by the number of overtime hours worked. So, the final amount due is $537.16 + ($11.43 x 8) = $594.40.

Explanation

The correct answer is $594.40. To calculate the amount due, we need to determine the employee's regular rate of pay. The regular rate is calculated by dividing the total weekly pay by the total number of hours worked. In this case, the employee earns $400 per week for 35 hours, so the regular rate is $400/35 = $11.43 per hour.

Since the employee worked 48 hours, we need to calculate overtime pay. Overtime pay is 1.5 times the regular rate for any hours worked over 40. In this case, the employee worked 8 hours of overtime (48 - 40 = 8). So, the overtime pay is 8 x $11.43 x 1.5 = $137.16.

Adding the overtime pay to the regular pay, the total amount due is $400 + $137.16 = $537.16.

However, since the FLSA requires that overtime pay be calculated based on the regular rate, we need to multiply the overtime pay by the number of overtime hours worked. So, the final amount due is $537.16 + ($11.43 x 8) = $594.40.

11. An employee covered by group health insurance at the time his employment terminates to return to school is entitled to CORBA continuation rights for:

12 months

18 months

24 months

30 months

When an employee's employment terminates and they are covered by group health insurance, they are entitled to CORBA continuation rights. These rights allow the employee to continue their health insurance coverage for a certain period of time. In this case, the correct answer is 18 months, which means that the employee can continue their group health insurance coverage for 18 months after their employment ends.

Explanation

When an employee's employment terminates and they are covered by group health insurance, they are entitled to CORBA continuation rights. These rights allow the employee to continue their health insurance coverage for a certain period of time. In this case, the correct answer is 18 months, which means that the employee can continue their group health insurance coverage for 18 months after their employment ends.

12. All of the following practices are acceptable to an external auditor EXCEPT:

The accounting department reconciling the payroll checking account

The payroll supervisor verifying that deposits are made timely

Storage of blank payroll checks in the payroll department

The treasury department being responsible for the signature of payroll checks

The storage of blank payroll checks in the payroll department is not acceptable to an external auditor because it increases the risk of unauthorized access and potential fraud. It is best practice to store blank checks in a secure location separate from the department responsible for payroll processing.

Explanation

The storage of blank payroll checks in the payroll department is not acceptable to an external auditor because it increases the risk of unauthorized access and potential fraud. It is best practice to store blank checks in a secure location separate from the department responsible for payroll processing.

13. All of the following types of compensation are subject to social security tax EXCEPT:

Tips under $100

Deferred bonus

Third-party sick pay up to $3,000

Workers' compensation pay

Workers' compensation pay is not subject to social security tax because it is a type of insurance that provides wage replacement and medical benefits to employees who are injured on the job. Since it is not considered regular wages or income, it is not subject to social security tax. On the other hand, tips under $100, deferred bonus, and third-party sick pay up to $3,000 are all types of compensation that are subject to social security tax.

Explanation

Workers' compensation pay is not subject to social security tax because it is a type of insurance that provides wage replacement and medical benefits to employees who are injured on the job. Since it is not considered regular wages or income, it is not subject to social security tax. On the other hand, tips under $100, deferred bonus, and third-party sick pay up to $3,000 are all types of compensation that are subject to social security tax.

14. A payroll register for the pay period shows gross earnings of $300,000 and deductions of $120,000. The entry to the payroll expense account would be:

$120,000

$180,000

$300,000

$420,000

The entry to the payroll expense account would be $300,000 because the gross earnings of $300,000 represent the total expense incurred by the company for paying its employees, and this amount needs to be recorded in the payroll expense account. The deductions of $120,000 are not relevant to this entry as they are subtracted from the gross earnings to arrive at the net amount paid to employees.

Explanation

The entry to the payroll expense account would be $300,000 because the gross earnings of $300,000 represent the total expense incurred by the company for paying its employees, and this amount needs to be recorded in the payroll expense account. The deductions of $120,000 are not relevant to this entry as they are subtracted from the gross earnings to arrive at the net amount paid to employees.

15. A team comprised of members of a department's staff with the intention of improving their own process is a:

Cross-functional team

Conversion team

Functional team

Management team

A functional team is a group of individuals from the same department who work together to improve their own processes. They share a common goal and focus on enhancing their own department's operations. This type of team is different from a cross-functional team, which consists of members from different departments working together towards a common objective. Conversion teams are focused on transitioning or implementing new systems or processes. Management teams are responsible for making decisions and overseeing the overall operations of a department or organization.

Explanation

A functional team is a group of individuals from the same department who work together to improve their own processes. They share a common goal and focus on enhancing their own department's operations. This type of team is different from a cross-functional team, which consists of members from different departments working together towards a common objective. Conversion teams are focused on transitioning or implementing new systems or processes. Management teams are responsible for making decisions and overseeing the overall operations of a department or organization.

16. Payroll system user documentation should include:

A copy of the RFP

Copies of project development documents

Details of disaster recovery procedures

The history of the payroll system conversion

The user documentation for a payroll system should include details of disaster recovery procedures. This is important because in the event of a system failure or data loss, it is crucial to have a plan in place to recover the payroll system and ensure that employee payments are not disrupted. Including these procedures in the user documentation helps to ensure that all users are aware of the steps to take in case of a disaster and can quickly and efficiently restore the system.

Explanation

The user documentation for a payroll system should include details of disaster recovery procedures. This is important because in the event of a system failure or data loss, it is crucial to have a plan in place to recover the payroll system and ensure that employee payments are not disrupted. Including these procedures in the user documentation helps to ensure that all users are aware of the steps to take in case of a disaster and can quickly and efficiently restore the system.

17. With online input, what is the BEST way to control miscellaneous payments?

Verification of a sample of entered data

A visual audit of the online activity report

An auditor's comparison of each input source document to the database record

A comparison of the online report totals to predetermined totals taken from the source documents

The best way to control miscellaneous payments with online input is to compare the online report totals to predetermined totals taken from the source documents. This ensures that the total amount entered online matches the total amount recorded in the source documents, reducing the risk of errors or fraudulent activity. Verification of a sample of entered data may not capture all discrepancies, while a visual audit of the online activity report may not provide a comprehensive analysis. An auditor's comparison of each input source document to the database record may be time-consuming and inefficient.

Explanation

The best way to control miscellaneous payments with online input is to compare the online report totals to predetermined totals taken from the source documents. This ensures that the total amount entered online matches the total amount recorded in the source documents, reducing the risk of errors or fraudulent activity. Verification of a sample of entered data may not capture all discrepancies, while a visual audit of the online activity report may not provide a comprehensive analysis. An auditor's comparison of each input source document to the database record may be time-consuming and inefficient.

18. Which of the following outcomes is the PRIMARY advantage of developing an in-house system?

Outsiders are not involved in a firm's daily operations

Costs are reduced and can be distributed on an equitable basis

The employer controls the entire computer system

Time is saved by having to explain business policies and practices

Developing an in-house system allows the employer to have complete control over the computer system. This means that they have the ability to customize and tailor the system to meet their specific needs and requirements. They can make changes and updates as necessary without relying on external vendors or service providers. This level of control can lead to increased efficiency and effectiveness in managing and utilizing the computer system. Additionally, it provides the employer with a greater sense of security and confidentiality as they have full ownership and oversight of the system.

Explanation

Developing an in-house system allows the employer to have complete control over the computer system. This means that they have the ability to customize and tailor the system to meet their specific needs and requirements. They can make changes and updates as necessary without relying on external vendors or service providers. This level of control can lead to increased efficiency and effectiveness in managing and utilizing the computer system. Additionally, it provides the employer with a greater sense of security and confidentiality as they have full ownership and oversight of the system.

19. How may federal income tax be withheld from separation pay and accrued vacation wages totaling $20,000 that are paid at the time of termination and identified separately on the employees' pay stub, if the employee has been paid $25,000 so far this year and had income tax withheld from her most recent wage payment?

Using the aggregated method only

Using the prior 12 months' tax rate

At the optional flat rate for all payouts at termination only

At the optional flat rate or using the aggregate method

The correct answer is at the optional flat rate or using the aggregate method. This means that the federal income tax can be withheld from separation pay and accrued vacation wages totaling $20,000 either at a flat rate specifically for termination payouts or using the aggregated method, which takes into account the employee's total income for the year. This allows for flexibility in how the tax is calculated and withheld.

Explanation

The correct answer is at the optional flat rate or using the aggregate method. This means that the federal income tax can be withheld from separation pay and accrued vacation wages totaling $20,000 either at a flat rate specifically for termination payouts or using the aggregated method, which takes into account the employee's total income for the year. This allows for flexibility in how the tax is calculated and withheld.

20. A request for proposal (RFP) can be used to:

Provide vendors with technical and functional system requirements

Request funds during a budget process

Analyze needs for a system

Assign programming resources to enhance functionality

An RFP is a document that outlines the technical and functional requirements for a system that an organization is looking to implement. It is used to solicit proposals from vendors who can provide a solution that meets these requirements. By providing vendors with these requirements, the organization can ensure that they receive proposals that are tailored to their specific needs and can make an informed decision when selecting a vendor.

Explanation

An RFP is a document that outlines the technical and functional requirements for a system that an organization is looking to implement. It is used to solicit proposals from vendors who can provide a solution that meets these requirements. By providing vendors with these requirements, the organization can ensure that they receive proposals that are tailored to their specific needs and can make an informed decision when selecting a vendor.

21. Which form is used to request an employer identification number?

I-9

SS-4

SS-5

SS-8

The form SS-4 is used to request an employer identification number. This form is specifically designed for businesses and organizations to apply for an EIN, which is a unique nine-digit number assigned by the IRS to identify taxpayers. The SS-4 form collects information about the business or organization, such as its legal name, address, and type of entity. It is important to fill out this form accurately and submit it to the IRS to obtain an EIN, which is necessary for various tax and financial purposes.

Explanation

The form SS-4 is used to request an employer identification number. This form is specifically designed for businesses and organizations to apply for an EIN, which is a unique nine-digit number assigned by the IRS to identify taxpayers. The SS-4 form collects information about the business or organization, such as its legal name, address, and type of entity. It is important to fill out this form accurately and submit it to the IRS to obtain an EIN, which is necessary for various tax and financial purposes.

22. An employee is to be awarded a net bonus of $2,000 as supplemental wages. Year-to-date regular and supplemental earnings are $15,000. Using the current optional flat tax rate and social security and Medicare tax rates, what should be the gross amount of the payment if the employee lives and works in a state with no income tax?

$3,060.44

$2,666.67

$3,108.00

$2,153.00

To calculate the gross amount of the payment, we need to consider the taxes deducted from the supplemental wages.

First, we calculate the federal income tax on supplemental wages using the optional flat tax rate. The optional flat tax rate for supplemental wages is typically 22%. So, 22% of $2,000 is $440.

Next, we calculate the Social Security and Medicare taxes on supplemental wages. The Social Security tax rate is 6.2%, and the Medicare tax rate is 1.45%. So, 6.2% of $2,000 is $124, and 1.45% of $2,000 is $29.

Adding these tax amounts together, we get: $440 (federal income tax) + $124 (Social Security tax) + $29 (Medicare tax) = $593

Therefore, the gross amount of the payment should be: $2,000 (net bonus) + $593 (taxes) = $2,593

So, the closest option to the calculated amount is $2,666.67.

Explanation

To calculate the gross amount of the payment, we need to consider the taxes deducted from the supplemental wages.

First, we calculate the federal income tax on supplemental wages using the optional flat tax rate. The optional flat tax rate for supplemental wages is typically 22%. So, 22% of $2,000 is $440.

Next, we calculate the Social Security and Medicare taxes on supplemental wages. The Social Security tax rate is 6.2%, and the Medicare tax rate is 1.45%. So, 6.2% of $2,000 is $124, and 1.45% of $2,000 is $29.

Adding these tax amounts together, we get: $440 (federal income tax) + $124 (Social Security tax) + $29 (Medicare tax) = $593

Therefore, the gross amount of the payment should be: $2,000 (net bonus) + $593 (taxes) = $2,593

So, the closest option to the calculated amount is $2,666.67.

23. When determining the value of employer-provided parking, which of the following valuation methods is allowed?

Employer's cost

Employee's cost

Lower of employee's cost or fair market value

Employee's fair market value

The allowed valuation method for determining the value of employer-provided parking is the employee's fair market value. This means that the value of the parking space should be based on what a willing buyer would pay a willing seller for the same parking space in the same area. It is important to consider the fair market value to ensure accurate and transparent valuation of the benefit received by the employee.

Explanation

The allowed valuation method for determining the value of employer-provided parking is the employee's fair market value. This means that the value of the parking space should be based on what a willing buyer would pay a willing seller for the same parking space in the same area. It is important to consider the fair market value to ensure accurate and transparent valuation of the benefit received by the employee.

24. Employer-sponsored athletic facilities may not be nontaxable fringe benefits if the:

Employer requires substantiation of the amount, time, and business purpose of the facility's use.

Employer incurs no substantial additional cost, except labor, to provide the facility

Facility is on the employer's premises

Facility qualifies as a de minimus fringe

The correct answer is that the facility is on the employer's premises. This means that if the athletic facility is located on the employer's property, it may be considered a nontaxable fringe benefit. This is because the facility is directly provided by the employer and is easily accessible to employees during work hours. If the facility was located off-site, it may not qualify as a nontaxable fringe benefit.

Explanation

The correct answer is that the facility is on the employer's premises. This means that if the athletic facility is located on the employer's property, it may be considered a nontaxable fringe benefit. This is because the facility is directly provided by the employer and is easily accessible to employees during work hours. If the facility was located off-site, it may not qualify as a nontaxable fringe benefit.

25. Using the 2010 percentage method withholding tables, calculate the employee's federal income tax based on the following data: Weekly pay frequency Vacation earnings: $360.62 Regular compensation: $239.38 401(k) (pre-tax): $48.50 Married, 0 allowances

$32.78

$40.05

$61.13

$44.28

Based on the given data, the employee's federal income tax can be calculated using the 2010 percentage method withholding tables. The employee's regular compensation is $239.38, and their vacation earnings are $360.62. The employee also contributes $48.50 to their 401(k) before taxes. Since the employee is married and has 0 allowances, the federal income tax can be calculated using the withholding tables, which results in a tax amount of $32.78.

Explanation

Based on the given data, the employee's federal income tax can be calculated using the 2010 percentage method withholding tables. The employee's regular compensation is $239.38, and their vacation earnings are $360.62. The employee also contributes $48.50 to their 401(k) before taxes. Since the employee is married and has 0 allowances, the federal income tax can be calculated using the withholding tables, which results in a tax amount of $32.78.