CPP Practice Exam 13

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.

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.