CPP Practice Exam 3
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.
Questions and Answers
- 1.
An accrual entry of $1,000 was made in 2008 for a bonus to be paid in January 2009. The bonus was paid in 2009 and federal income tax (using the supplemental rate) and FICA tax were paid by the employer. Which of the following is the correct entry to record the disbursement of the bonus in January 2009?
- A.
Debit salary expense $484.78, debit wages payable $1,000, credit cash $1,000, credit taxes payable $484.78
- B.
Debit wages payable $1,326.50, debit taxes payable $326.50, credit cash $1,00
- C.
Debit salary expense $326.50, debit wages payable $1,000, credit cash $1,000, credit cash $1,000, credit taxes payable $326.50
- D.
Debit salary expense $1484.78, credit taxes payable $484.78, credit cash $1,000
Correct Answer
A. Debit salary expense $484.78, debit wages payable $1,000, credit cash $1,000, credit taxes payable $484.78Explanation
The correct entry to record the disbursement of the bonus in January 2009 is to debit salary expense for $484.78, debit wages payable for $1,000, credit cash for $1,000, and credit taxes payable for $484.78. This entry reflects the payment of the bonus, the reduction in wages payable, the cash outflow, and the payment of taxes.Rate this question:
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- 2.
Which of the following is an example of a system production control technique?
- A.
Balances in liability
- B.
The payroll manager periodically distributes paychecks
- C.
Payroll journal entries are approved by the finance manager
- D.
A calendar is maintained for payroll run dates
Correct Answer
D. A calendar is maintained for payroll run datesExplanation
A calendar is maintained for payroll run dates is an example of a system production control technique because it helps in planning and scheduling the payroll process. By maintaining a calendar, the company can ensure that the payroll is processed on time and in an organized manner. This technique helps in coordinating different tasks and resources involved in the payroll process, ensuring efficiency and accuracy.Rate this question:
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- 3.
Under which of the following situations may an employee change an election made under a 125 cafeteria plan within the plan year?
- A.
Employee receives a salary increase
- B.
Employees divorces
- C.
Employee is demoted
- D.
Employee transfers to another department
Correct Answer
B. Employees divorcesExplanation
In the event of an employee's divorce, they may be eligible to change their election made under a 125 cafeteria plan within the plan year. This is because a divorce is a significant life event that can impact an individual's financial situation and healthcare needs. Therefore, allowing the employee to modify their election ensures that they have the opportunity to adjust their benefits to better suit their new circumstances.Rate this question:
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- 4.
An integrated HRIS offers the advantage of:
- A.
Enhanced screen display of employee data
- B.
Improved security of confidential payroll
- C.
Reduced effort in the maintenance of employee records
- D.
Decreased requirements for technical improvements
Correct Answer
C. Reduced effort in the maintenance of employee recordsExplanation
An integrated HRIS (Human Resource Information System) combines various HR functions into one system, making it easier to manage and maintain employee records. By automating processes such as data entry, storage, and retrieval, an integrated HRIS reduces the manual effort required to maintain employee records. This streamlines HR operations and frees up time for HR professionals to focus on other important tasks.Rate this question:
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- 5.
Employee Jack, a nonexempt employee, must travel by plane from Chicago to Houston to inspect the security system recently, installed at a client's site. Jack is normally scheduled to work from 8:00 a.m. to 5:00 p.m., Monday through Friday. Jack arrives at Chicago O'Hare airport on Sunday at 4:00 p.m. and lands at Houston Intercontinental airport at 6:00 p.m. Jack begins work at 8:00 a.m. on Monday, works through lunch, and returns to the airport for his return flight at 5:00 p.m. He arrives in Chicago at 7:00 p.m. Monday evening. Under FLSA, how many hours of pay are due Jack for Sunday and Monday?
- A.
14
- B.
10
- C.
11
- D.
8
Correct Answer
B. 10Explanation
Jack is a nonexempt employee, which means he is entitled to be paid for all hours worked. According to the information given, Jack arrives at the airport on Sunday at 4:00 p.m. and lands in Houston at 6:00 p.m. He begins work on Monday at 8:00 a.m., works through lunch, and returns to the airport for his return flight at 5:00 p.m. He arrives in Chicago at 7:00 p.m. Monday evening. Therefore, Jack worked a total of 10 hours from Sunday 4:00 p.m. to Monday 7:00 p.m., and he is due pay for those 10 hours.Rate this question:
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- 6.
Sally's department was scheduled to work from 8:00 a.m. until 5:00 p.m. It was announced to all employees that a severe winter storm was expected to reach the city between 4:00 p.m. and 5:00 p.m. Employees of Sally's department asked if they, like most other departments, would be allowed to leave work at 3:00 p.m. to avoid being caught in the storm. Sally was sympathetic, but after much discussion denied the request, stating that hte policy was clear that employees were to remain on duty until 5:00 p.m. Which of the following management styles is Sally demonstrating?
- A.
Autocratic
- B.
Participative
- C.
Bureaucratic
- D.
Diplomatic
Correct Answer
C. BureaucraticExplanation
Sally is demonstrating a bureaucratic management style. This is evident from her adherence to the policy that employees must remain on duty until 5:00 p.m., despite the request from her department to leave early due to the impending winter storm. Bureaucratic management style focuses on strict adherence to rules, regulations, and policies, often without considering individual circumstances or flexibility. Sally's decision to deny the request and prioritize following the policy aligns with this management style.Rate this question:
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- 7.
For 2009, the mandatory rate of federal income tax withholding on supplemental wages in excess of $1 million is:
- A.
28%
- B.
20%
- C.
35%
- D.
25%
Correct Answer
C. 35%Explanation
The correct answer is 35%. In 2009, the mandatory rate of federal income tax withholding on supplemental wages in excess of $1 million was 35%. This means that if an individual received supplemental wages (such as bonuses or commissions) that exceeded $1 million, 35% of those wages would be withheld for federal income tax purposes.Rate this question:
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- 8.
Which of the following forms pertains to a merger or acquisition?
- A.
Schedule M
- B.
Schedule A
- C.
Schedule B
- D.
Schedule D
Correct Answer
D. Schedule DExplanation
Schedule D pertains to a merger or acquisition. It is a form that is used to report capital gains and losses from the sale or exchange of certain assets, including those related to mergers and acquisitions. This form is typically filed by individuals, partnerships, corporations, and trusts to report these transactions to the Internal Revenue Service (IRS).Rate this question:
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- 9.
A manager who embraces the theory of situational leadership is most likely to emphasize:
- A.
Versatility in the approach used in dealing with subordinates
- B.
Strict adherence to all company policies and procedures
- C.
The need for employees to have freedom in getting their work done
- D.
Quick decision making and prompt reaction to events
Correct Answer
A. Versatility in the approach used in dealing with subordinatesExplanation
A manager who embraces the theory of situational leadership understands that different situations require different leadership approaches. They recognize that not all employees are the same and may require different levels of guidance and support. By emphasizing versatility in their approach, the manager can adapt their leadership style to best suit the needs of their subordinates, ultimately leading to more effective and successful outcomes.Rate this question:
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- 10.
In 2009, employee Chris was transferred from her company's headquarters to a distribution center 1,000 miles away. The company reimbursed her for meal expenses totaling $100 and lodging expenses totaling $300 incurred while driving from her old residence to her new. Chris' company direclty paid the moving company $2,000 for transporting her houshold goods. What portion of Chris' employer-paid relocation expenses is reported in box 1, "wages, tips, other compensation?"
- A.
$0
- B.
$100
- C.
$2,300
- D.
$2,400
Correct Answer
B. $100Explanation
The portion of Chris' employer-paid relocation expenses reported in box 1, "wages, tips, other compensation" is $100. This is because the company reimbursed her for meal expenses totaling $100. The lodging expenses and transportation of her household goods are not included in this amount.Rate this question:
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- 11.
In 2009, employee Chris was transferred from her company's headquarters to a distribution center 1,000 miles away. The company reimbursed her for meal expenses totaling $100 and lodging expenses totaling $300 incurred while driving from her old residence to her new. Chris' company direclty paid the moving company $2,000 for transporting her houshold goods. How much of the relocation reimbursement is exempt from FITW, FICA, and FUTA?
- A.
$0
- B.
$100
- C.
$2,300
- D.
$2,400
Correct Answer
C. $2,300Explanation
The relocation reimbursement is exempt from FITW, FICA, and FUTA because it includes the meal expenses, lodging expenses, and the payment made directly to the moving company. Therefore, the total amount of the reimbursement that is exempt is $2,300.Rate this question:
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- 12.
Which of the follwoing is one of the purposes of a job description?
- A.
Illustrates the position in relation to others in the organization
- B.
Provides implementation plan for conversion to new system
- C.
Describes incumbent's obligations to pay appropriate federa, state, and local taxes while holding the position
- D.
Outlines individual performance goals for next fiscal year
Correct Answer
A. Illustrates the position in relation to others in the organizationExplanation
A job description serves the purpose of illustrating the position in relation to others in the organization. It outlines the roles, responsibilities, and requirements of a specific job, including the reporting structure and how it fits within the overall organizational structure. This helps employees understand their position within the company and how they contribute to the larger goals and objectives. It also provides clarity on the hierarchy and relationships between different positions, facilitating effective communication and collaboration within the organization.Rate this question:
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- 13.
What is one of the major considerations when evaluating and selecting a software system for payroll?
- A.
The arrangement of the panels for on-line data entry
- B.
The sale's representative's knowledge of payroll
- C.
The fit of the technical platform with the company's strategic plans
- D.
The number of trainers the software has available
Correct Answer
C. The fit of the technical platform with the company's strategic plansExplanation
When evaluating and selecting a software system for payroll, one of the major considerations is the fit of the technical platform with the company's strategic plans. This means that the software should align with the company's long-term goals and objectives, and be able to support the company's specific payroll requirements. It is important for the software to be compatible with the company's existing systems and infrastructure, and have the necessary features and functionalities to meet the company's payroll needs. By considering the fit of the technical platform with the company's strategic plans, the company can ensure that they are making a suitable choice for their payroll system.Rate this question:
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- 14.
Employee Dan, a sales representative, is reimbursed for business travel expenses incurred for out-of-town trips. Dan completes an expense report each month showing the date expenses were incurred and receipts substantiating the amount of the expenses. In August, Dan's employer reimbursed travel expenses of $500 for meals, $1,200 for hotels, and $900 for airfare. Choose the answer that properly reflects the income Dan must declare and the corporate tax deduction that Dan's employer may claim
- A.
Dan's income =$250; Employer's deduction = $2,600
- B.
Dan's income =$0; Employer's deduction = $2,600
- C.
Dan's income =$500; Employer's deduction = $2,350
- D.
Dan's income =$0; Employer's deduction = $2,350
Correct Answer
D. Dan's income =$0; Employer's deduction = $2,350Explanation
Dan's income is $0 because he is being reimbursed for his business travel expenses. Reimbursements for business expenses are not considered taxable income. The employer's deduction is $2,350, which is the total amount of expenses reimbursed to Dan ($500 for meals, $1,200 for hotels, and $900 for airfare). The employer can deduct these expenses as business expenses.Rate this question:
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- 15.
Which fo the following is one of the purposes of a job description?
- A.
Provides security access and passwords to be assigned to the incumbent
- B.
Specifies frequency of interdepartmental meetings
- C.
Reinforces delineation between statutory employees and independent coworkers
- D.
Describes the experience, skills, knowledge, abilities, education, and training needed to perform the job.
Correct Answer
D. Describes the experience, skills, knowledge, abilities, education, and training needed to perform the job.Explanation
A job description is a document that outlines the responsibilities, duties, and requirements of a particular job. It provides a detailed description of the experience, skills, knowledge, abilities, education, and training needed to perform the job. This information is crucial for both the employer and the potential employees as it helps in attracting suitable candidates, setting expectations, and ensuring that the right person is hired for the job. It also serves as a reference for performance evaluations, training and development plans, and career progression within the organization.Rate this question:
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- 16.
Which of the following generally is excluded when computing the workers' compensation insurance premium?
- A.
Vacation pay
- B.
Bonuses
- C.
Premium overtime pay
- D.
Shift pay
Correct Answer
C. Premium overtime payExplanation
Premium overtime pay is generally excluded when computing the workers' compensation insurance premium because it is considered an additional payment for working extra hours and not a regular part of an employee's wages. Workers' compensation insurance premiums are typically based on the total payroll, which includes regular wages, but excludes additional payments such as overtime pay, bonuses, and shift pay.Rate this question:
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- 17.
It is suggested that an employee authorization for ACH credits and reversals be retained for how many years following the employee's discountinuance of direct deposit?
- A.
0
- B.
2
- C.
3
- D.
4
Correct Answer
B. 2Explanation
An employee authorization for ACH credits and reversals should be retained for 2 years following the employee's discontinuance of direct deposit. This is important for record-keeping purposes and to ensure that there is documentation of the employee's consent to authorize ACH transactions. Retaining the authorization for this period of time allows for any potential inquiries or audits that may arise within that timeframe.Rate this question:
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- 18.
Wages are paid on Wednesday, June 30, that gives rise to a deposit liability fo $90,000. Wages are again paid on Thursday July 1, that give rise to a deposit liability of $12,000. Assume that Monday, July 5, is a nonbanking day. Under the semiweekly deposit rule, when are the deposits due?
- A.
$102,000 is due on Wednesday, July 7
- B.
$102,000 is due on Friday, July 2
- C.
$102,000 is due on Thursday, July 8
- D.
$102,000 is due on Friday, July 9
Correct Answer
C. $102,000 is due on Thursday, July 8Explanation
Based on the information given, the wages are paid on Wednesday, June 30, and Thursday, July 1. However, Monday, July 5, is a nonbanking day. According to the semiweekly deposit rule, the deposits are due on the next banking day after the wages are paid. Therefore, the deposit for $90,000 is due on Friday, July 2, and the deposit for $12,000 is due on Thursday, July 8. Adding these two amounts together, the total deposit of $102,000 is due on Thursday, July 8.Rate this question:
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- 19.
Which of the following would NOT be an asset account?
- A.
Wages payable
- B.
Work-in-progress
- C.
Cash
- D.
Employee receivables
Correct Answer
A. Wages payableExplanation
Wages payable would not be an asset account because it represents an obligation or liability of the company to pay wages to its employees in the future. Asset accounts are typically used to record resources or economic benefits owned by the company, such as cash, work-in-progress, or employee receivables. Wages payable, on the other hand, falls under the category of liability accounts as it represents an amount owed by the company to its employees.Rate this question:
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- 20.
When the state does not allow workers' compensation converage through a private insurance carrier, this is referred to as a:
- A.
Public fund state
- B.
Competitive state
- C.
National council state
- D.
Monopolistic state
Correct Answer
D. Monopolistic stateExplanation
A monopolistic state refers to a state where workers' compensation coverage is provided exclusively by a government-operated fund, and private insurance carriers are not allowed to offer this coverage. In these states, the government has a monopoly on providing workers' compensation insurance.Rate this question:
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- 21.
Which of the following best describes the model in outsourcing in which the service provider is the co-employer of it's client?
- A.
Shared services
- B.
Professional employer organization
- C.
Temporary agency
- D.
Application service provider
Correct Answer
B. Professional employer organizationExplanation
A professional employer organization (PEO) is a type of outsourcing model where the service provider becomes the co-employer of its client. This means that the PEO takes on certain employer responsibilities, such as payroll, benefits administration, and HR management, while the client maintains control over their employees' day-to-day tasks and operations. This arrangement allows the client to focus on their core business while relying on the expertise and resources of the PEO for HR-related functions.Rate this question:
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- 22.
An example of a policy is:
- A.
Payroll receives changes of status documents from human resources after data entry has occurred.
- B.
Time cards are filed by cost center in the records room
- C.
The PC's of the payroll employees are connected to the same printer
- D.
Employees receive paid sick leave after the second day of absence.
Correct Answer
D. Employees receive paid sick leave after the second day of absence.Explanation
This statement describes a policy because it outlines a specific rule or guideline that governs when employees are eligible for paid sick leave. It establishes a clear criteria for when this benefit is granted, which is after the second day of absence. This policy helps to ensure consistency and fairness in how sick leave is allocated to employees.Rate this question:
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- 23.
Which of the following is a component of a graphical user interface?
- A.
LAN/WAN
- B.
Icon
- C.
CD-RPM
- D.
Modem
Correct Answer
B. IconExplanation
An icon is a visual representation or symbol that represents a specific function, file, or application on a graphical user interface (GUI). Icons are used to provide a user-friendly and intuitive way for users to interact with the computer system. They are typically small images or symbols that can be clicked or tapped to perform certain actions or access specific features or programs. Icons are an essential component of GUIs as they help users navigate and interact with the system effectively.Rate this question:
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- 24.
Which of the following is not likely to be in the skills set needed for a manager?
- A.
Organization
- B.
Planning
- C.
Communications
- D.
Partiality
Correct Answer
D. PartialityExplanation
Partiality is not likely to be in the skills set needed for a manager because managers are expected to be fair and impartial in their decision-making and treatment of employees. Partiality can lead to favoritism, discrimination, and a negative work environment. Effective managers should prioritize fairness and equality to ensure a harmonious and productive workplace.Rate this question:
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- 25.
Which of the following is the primary purpose of an employee's performance review?
- A.
To convey the company's financial goals for the next fiscal year
- B.
To present a comparison of the salary of the employee to that of others in the department
- C.
To encourage performance that is on task with established goals
- D.
To document the justification for terminating an employee
Correct Answer
C. To encourage performance that is on task with established goalsExplanation
The primary purpose of an employee's performance review is to encourage performance that is on task with established goals. Performance reviews are conducted to provide feedback, recognize achievements, identify areas for improvement, and align individual performance with organizational objectives. They serve as a means to motivate employees, set expectations, and foster professional growth and development. By focusing on encouraging performance that aligns with established goals, performance reviews help ensure that employees are working towards the success of the organization.Rate this question:
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