CPP Practice Exam 13
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 that reveal the correct answer before you move on to the next question. The questions and their associated answers are randomized every time you take the quiz to avoid pattern development. Questions requiring calculations that change from year to year have been omitted. Good luck as you pursue this goal. I hope this helps you prepare. Inspired by my lovely wife as she pursued this goal as Read morewell.
- 1.
How often are Form 940 taxable wages reported?
- A.
Annually
- B.
Semi-annually
- C.
Quarterly
- D.
Monthly
Correct Answer
A. AnnuallyExplanation
Form 940 is a tax form used by employers to report their annual federal unemployment tax liability. The correct answer is "annually" because employers are required to report their taxable wages and calculate the amount of federal unemployment tax owed once a year. This form is typically filed at the end of the calendar year, and it helps the government track and collect unemployment taxes to fund unemployment benefits for eligible workers.Rate this question:
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- 2.
An employee claims married and no withholding allowances on Form W-4, earns $700 biweekly and contributes $50 per pay period to a 401(k) plan. Using the percentage method, what is the total of the biweekly deductions from the employee's pay for federal and social security and Medicare taxes?
- A.
$65.65
- B.
$70.65
- C.
$61.83
- D.
$115.20
Correct Answer
A. $65.65Explanation
The correct answer is $65.65. This can be calculated by first determining the employee's taxable wages, which is their gross pay minus the 401(k) contribution. In this case, the taxable wages would be $700 - $50 = $650. Then, using the percentage method, the federal income tax is calculated by multiplying the taxable wages by the appropriate tax rate. The social security tax is calculated by multiplying the taxable wages by the social security tax rate, and the Medicare tax is calculated by multiplying the taxable wages by the Medicare tax rate. Adding these three amounts together gives a total of $65.65.Rate this question:
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- 3.
On a company's financial statements, payroll tax expense appears in the:
- A.
Balanced sheet
- B.
Accrued payroll
- C.
Salaries expense
- D.
Income statement
Correct Answer
D. Income statementExplanation
Payroll tax expense appears in the income statement because it represents the taxes that the company pays on behalf of its employees. This expense is deducted from the company's revenues to calculate its net income. It is not included in the balance sheet because it is an expense incurred during the period and does not affect the company's assets or liabilities. It is also not included in accrued payroll or salaries expense, as these accounts represent the actual wages and salaries paid to employees, not the taxes associated with them.Rate this question:
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- 4.
What is the chief advantage of a vendor payroll package?
- A.
Reduced processing time
- B.
Inexpensiveness and ease of installation
- C.
No required major in-house system development
- D.
Lower cost than a service provider contract
Correct Answer
C. No required major in-house system developmentExplanation
The chief advantage of a vendor payroll package is that it does not require major in-house system development. This means that companies do not have to invest time and resources in developing and maintaining their own payroll system. Instead, they can simply purchase a ready-made package from a vendor, saving them time and effort. This can be particularly beneficial for smaller companies or those without a dedicated IT department.Rate this question:
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- 5.
Whch of the following elements is essential to a disaster recovery plan?
- A.
An excess supply of checks and direct deposit stubs
- B.
A compatible off-site remote location to produce payrolls
- C.
Detailed documentation of current company policies
- D.
A procedure for limiting security system access
Correct Answer
B. A compatible off-site remote location to produce payrollsExplanation
A compatible off-site remote location to produce payrolls is essential to a disaster recovery plan because it ensures that payroll operations can continue uninterrupted in the event of a disaster or disruption at the primary location. This allows the company to continue paying its employees on time and maintain financial stability during a crisis.Rate this question:
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- 6.
Which of the following practices is a strong internal control procedure?
- A.
Have the payroll bank account reconciled in the payroll department
- B.
Have the payroll manager distribute paychecks
- C.
Place payroll checks under the personal control of the payroll manager
- D.
Have a person other than the person who requested and authorized the payments prepare the payroll checks.
Correct Answer
D. Have a person other than the person who requested and authorized the payments prepare the payroll checks.Explanation
Having a person other than the person who requested and authorized the payments prepare the payroll checks is a strong internal control procedure because it helps to prevent fraud and ensure the accuracy of the payroll process. This practice creates a separation of duties and reduces the risk of collusion or unauthorized payments. By having a different individual involved in the preparation of payroll checks, there is a higher level of accountability and oversight, which enhances the overall control environment.Rate this question:
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- 7.
During 2010, an employee worked for company A and quit after earning $108,000. In the same year the employee was hired by company B. With respect to social security, Medicare and FUTA, how should company B treat the employee's earnings as of the first wage payment?
- A.
Start accumulating social security, Medicare, and FUTA wages, and withhold both social security and Medicare taxes
- B.
Start accumulating Medicare wages only, and withholding only Medicare tax
- C.
Start accumulating social security, Medicare, and FUTA wages, but withhold Medicare tax only
- D.
Start accumulating Medicare wages only, but withhold both social security and Medicare taxes
Correct Answer
A. Start accumulating social security, Medicare, and FUTA wages, and withhold both social security and Medicare taxesExplanation
Company B should start accumulating social security, Medicare, and FUTA wages and withhold both social security and Medicare taxes because the employee has already earned $108,000 in the same year from company A. Therefore, the earnings from company B should be considered in conjunction with the earnings from company A for the purpose of calculating social security and Medicare taxes. Additionally, FUTA (Federal Unemployment Tax Act) wages should also be accumulated as it is a federal tax imposed on employers to fund unemployment benefits.Rate this question:
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- 8.
Which of the following documents proves an employee's identity and authorization to work?
- A.
Social security card
- B.
Unexpired U.S. passport
- C.
Birth certificate
- D.
Form I-9
Correct Answer
B. Unexpired U.S. passportExplanation
An unexpired U.S. passport serves as a proof of an employee's identity and authorization to work. It is a valid and recognized document that verifies both the person's identity and their eligibility to work in the United States. The passport is issued by the government and contains personal information, including a photo, that can be used to confirm the individual's identity. Additionally, the U.S. passport confirms that the person is a citizen or has legal status to work in the country.Rate this question:
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- 9.
How are salaries reflected on the income statement
- A.
Income
- B.
Assets
- C.
Accruals
- D.
Expenses
Correct Answer
D. ExpensesExplanation
Salaries are reflected on the income statement as expenses. The income statement is a financial statement that shows a company's revenues, expenses, and net income over a specific period of time. Salaries paid to employees are considered operating expenses and are deducted from the company's revenues to calculate its net income. This reflects the cost of labor and is an important component in determining the profitability of a company.Rate this question:
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- 10.
An employee is paid a bonus of $1,500 with a regular biweekly wage payment of $2,000 in 2010 that is indicated separately on the employee's pay stub. The employee has received no supplemental wages so far this year. the employee has an elective deferral of 5% of regular wages made to the 401(k) plan each pay period. For federal income tax withholding purpose, the company uses the optional flat rate for all bonuses and the percentage method for regular wage payments. The employee's W-4 claims married with 2 allowances. the employee has no state or local income taxes or any other deductions. What is the employee's net pay?
- A.
$2,621.91
- B.
$2,694.23
- C.
$2,614.36
- D.
$2,606.01
Correct Answer
C. $2,614.36Explanation
The employee's net pay can be calculated by subtracting the federal income tax withholding from the total earnings. The regular wage payment of $2,000 is subject to federal income tax withholding using the percentage method. The employee's W-4 claims married with 2 allowances, so the federal income tax withholding is calculated based on the tax brackets for a married individual with 2 allowances. The bonus of $1,500 is subject to federal income tax withholding using the optional flat rate. After subtracting the federal income tax withholding from the total earnings, the employee's net pay is $2,614.36.Rate this question:
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- 11.
All of the following techniques would enhance the level of customer service EXCEPT:
- A.
Adding more customer service personnel
- B.
Publishing payroll customer service procedures, calendars, and directories
- C.
Utilizing automated call processing tools to take and process caller inquiries
- D.
Training company management on pay calculation and tax withholding rules
Correct Answer
D. Training company management on pay calculation and tax withholding rulesExplanation
Training company management on pay calculation and tax withholding rules would not directly enhance the level of customer service. Customer service personnel, publishing procedures and directories, and utilizing automated call processing tools all have a direct impact on improving customer service by increasing efficiency, providing accurate information, and reducing wait times. However, training management on pay calculation and tax withholding rules is more related to internal operations and may not directly affect the customer service experience.Rate this question:
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- 12.
The KEY difference between user guides and payroll policies and procedures is:
- A.
User guides focus on tasks associated with automated tools
- B.
Payroll policies and procedures set company policies and standards
- C.
User guides help payroll personnel interpret company policy
- D.
Payroll policies and procedures permit human resources to design new compensation and benefits programs.
Correct Answer
A. User guides focus on tasks associated with automated toolsExplanation
User guides are specifically designed to provide instructions and guidance on how to use automated tools or software. They outline step-by-step procedures and explain the functionality of the tools. On the other hand, payroll policies and procedures are documents that establish company policies and standards regarding payroll processes and practices. They outline rules, regulations, and guidelines that govern the payroll function. While user guides assist payroll personnel in understanding how to use the tools, payroll policies and procedures do not directly relate to designing new compensation and benefits programs, as that falls under the purview of human resources.Rate this question:
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- 13.
A local national is defined as an employee:
- A.
From another country working in the U.S.
- B.
From the U.S. working in a foreign country
- C.
From a foreign company working in the U.S.
- D.
From a foreign country working in his or her home country location
Correct Answer
D. From a foreign country working in his or her home country locationExplanation
The correct answer is "from a foreign country working in his or her home country location." A local national is an employee who is from a foreign country but is working in their own home country. This means that they are not an expatriate or an employee working in a foreign country.Rate this question:
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- 14.
What is the effect of failing to record salaries that are earned but not paid at the end of an accounting period?
- A.
Understatement of expenses for the period
- B.
Overstatement of expenses for the period
- C.
Understatement of assets for the period
- D.
Overstatement of liabilities for the period
Correct Answer
A. Understatement of expenses for the periodExplanation
Failing to record salaries that are earned but not paid at the end of an accounting period would result in an understatement of expenses for the period. This is because the unpaid salaries should be recognized as an expense in the period they were earned, even if they have not yet been paid. By not recording these expenses, the financial statements would not accurately reflect the true expenses incurred by the company during the period.Rate this question:
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- 15.
One employment data element in the master file is:
- A.
Hourly rate of pay
- B.
Social security number
- C.
Birth date
- D.
Occupation
Correct Answer
A. Hourly rate of payExplanation
The correct answer is "hourly rate of pay" because it is stated that it is one of the employment data elements in the master file. The other options, such as social security number, birth date, and occupation, may also be important data elements in the master file, but they are not specifically mentioned in the given information. Therefore, the hourly rate of pay is the only option that is confirmed to be an employment data element.Rate this question:
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- 16.
Which of the following authorities dictates the information provided on a payroll check stub?
- A.
Individual states
- B.
Federal Unemployment Tax Act
- C.
Federal Wage and Hour Division
- D.
Social Security Administration
Correct Answer
A. Individual statesExplanation
The information provided on a payroll check stub is dictated by individual states. Each state has its own specific requirements and regulations regarding the information that must be included on a payroll check stub, such as wages, deductions, and taxes. Therefore, it is the responsibility of the individual states to determine and enforce these requirements.Rate this question:
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- 17.
Which of the following forms may be submitted to the IRS in order to receive a written determination of a worker's status as an employee or independent contractor?
- A.
Form W-5
- B.
Form SS-5
- C.
Form SS-8
- D.
Form W-9
Correct Answer
C. Form SS-8Explanation
Form SS-8 may be submitted to the IRS in order to receive a written determination of a worker's status as an employee or independent contractor. This form is used by both the worker and the employer to request a determination from the IRS on whether the worker should be classified as an employee or an independent contractor for tax purposes. The IRS will review the information provided and make a determination based on the facts and circumstances of the worker's relationship with the employer.Rate this question:
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- 18.
Company deadlines for payroll data input documents are essential for:
- A.
Timely processing of the payroll
- B.
Accurate entry of data
- C.
Guaranteeing that all information is processed
- D.
Adequate auditing purposes
Correct Answer
A. Timely processing of the payrollExplanation
Company deadlines for payroll data input documents are essential for ensuring that the payroll is processed on time. By setting deadlines, the company can ensure that all necessary data is collected and inputted in a timely manner, allowing for the payroll to be processed and employees to be paid on time. This helps to maintain employee satisfaction and ensures that the company remains compliant with labor laws. Additionally, timely processing of the payroll can also help the company to manage their cash flow effectively.Rate this question:
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- 19.
Transactions are recorded in chronological order in books of original entry called:
- A.
Registers
- B.
Vouchers
- C.
Invoices
- D.
Journals
Correct Answer
D. JournalsExplanation
Transactions are recorded in chronological order in books of original entry called journals. Journals are used to record the daily transactions of a business before they are transferred to the general ledger. This allows for a systematic and organized record-keeping process, ensuring accuracy and transparency in financial reporting.Rate this question:
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- 20.
Upward communication involves:
- A.
Dissemination of management decisions to the staff
- B.
Interactions between you and your manager
- C.
Passing information to management
- D.
Conduction quality circle meetings
Correct Answer
C. Passing information to managementExplanation
Upward communication refers to the process of transmitting information from lower-level employees to higher-level management. This can include sharing feedback, suggestions, or concerns with management. By passing information to management, employees contribute to the decision-making process and help management make informed decisions. This type of communication is crucial for maintaining transparency, fostering employee engagement, and ensuring effective organizational functioning.Rate this question:
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- 21.
For how many years must the employer's copy of Form 940 be retained?
- A.
2
- B.
3
- C.
4
- D.
5
Correct Answer
C. 4Explanation
The employer's copy of Form 940 must be retained for 4 years. This is because the IRS requires employers to keep records of employment tax returns, including Form 940, for a minimum of 4 years. This is to ensure that employers have documentation to support the information reported on the form in case of an audit or investigation by the IRS.Rate this question:
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- 22.
Which of the following factors provides system security?
- A.
Access level authorizations
- B.
Shared passwords
- C.
Conducting "physical payouts"
- D.
Segregation of duties
Correct Answer
A. Access level authorizationsExplanation
Access level authorizations provide system security by controlling the level of access that users have to the system. This ensures that only authorized individuals can access certain information or perform specific actions, reducing the risk of unauthorized access or misuse of the system. By assigning different access levels to different users, organizations can enforce security measures and protect sensitive data from potential threats or breaches.Rate this question:
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- 23.
On what form must mistekenly paid wages, for which no repayment is made, be reported?
- A.
W-2
- B.
W-4
- C.
1099-R
- D.
1099-MISC
Correct Answer
A. W-2Explanation
Mistakenly paid wages, for which no repayment is made, must be reported on Form W-2. This form is used by employers to report wages and taxes withheld for each employee. It includes information about the employee's wages, tips, and other compensation, as well as any taxes withheld. Reporting mistakenly paid wages on Form W-2 ensures that the employee's income is accurately recorded and reported to the IRS.Rate this question:
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- 24.
At least how often must employers report fringe benefits as income for federal tax withholding purposes?
- A.
Each pay period
- B.
Monthly
- C.
Quarterly
- D.
Annually
Correct Answer
D. AnnuallyExplanation
Employers must report fringe benefits as income for federal tax withholding purposes annually. This means that they need to report these benefits once a year. Reporting fringe benefits annually allows employers to accurately calculate and withhold the appropriate amount of federal taxes from employees' paychecks. It also ensures compliance with federal tax regulations and helps in maintaining accurate records for tax purposes. Reporting fringe benefits annually simplifies the process for both employers and employees, as it reduces the frequency of reporting and allows for better tax planning.Rate this question:
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- 25.
Which of the follwoing records MUST be kept for four years?
- A.
Hours worked
- B.
Time cards
- C.
OSHA records
- D.
Voided payroll checks
Correct Answer
D. Voided payroll checksExplanation
Voided payroll checks must be kept for four years. This is because voided payroll checks serve as important documentation for accounting and auditing purposes. They provide a record of any errors or discrepancies in payroll and can be used as evidence in case of any disputes or legal issues. Keeping voided payroll checks for four years ensures that they are available for reference and verification if needed.Rate this question:
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Mar 21, 2023Quiz Edited by
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Sep 22, 2011Quiz Created by
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