Payroll Accounting Jeanette Landin 5e - Test Bank
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Payroll Accounting Jeanette Landin 5e - Test Bank

Payroll Accounting Jeanette Landin 5e - Test Bank   Instant Download - Complete Test Bank With Answers     Sample Questions Are Posted Below   Payroll Accounting 2019, 5e (Landin) Chapter 4   Fringe Benefits and Voluntary Deductions   1) Fringe benefits are given to employees in return for their service to the company.   Answer:  …

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Payroll Accounting Jeanette Landin 5e – Test Bank

 

Instant Download – Complete Test Bank With Answers

 

 

Sample Questions Are Posted Below

 

Payroll Accounting 2019, 5e (Landin)

Chapter 4   Fringe Benefits and Voluntary Deductions

 

1) Fringe benefits are given to employees in return for their service to the company.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Define Fringe Benefits within the Context of Payroll

Learning Objective:  04-01 Define Fringe Benefits within the Context of Payroll

Bloom’s:  Remember

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

2) Fringe benefits and employee satisfaction have no correlation.

 

Answer:  FALSE

Explanation:  Companies that offer fringe benefits have higher levels of employee satisfaction.

Difficulty: 1 Easy

Topic:  Define Fringe Benefits within the Context of Payroll

Learning Objective:  04-01 Define Fringe Benefits within the Context of Payroll

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

3) Fringe benefits are part of an employee’s cash compensation package.

 

Answer:  FALSE

Explanation:  Fringe benefits may be included in employee pay but are not considered part of the cash compensation package.

Difficulty: 1 Easy

Topic:  Define Fringe Benefits within the Context of Payroll

Learning Objective:  04-01 Define Fringe Benefits within the Context of Payroll

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

4) Premiums for insurance purchased through qualified cafeteria plans may be deducted from an employee’s pay on a pre-tax basis.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Interpret Cafeteria Plan Types

Learning Objective:  04-02 Interpret Cafeteria Plan Types

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

5) All employee contributions to qualified Premium-Only Plans (POP) and Flexible Spending Arrangements (FSA) are deducted on a pre-tax basis.

 

Answer:  FALSE

Explanation:  FSAs contributions are limited to $2,600 per calendar year.

Difficulty: 1 Easy

Topic:  Interpret Cafeteria Plan Types

Learning Objective:  04-02 Interpret Cafeteria Plan Types

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

6) Certain fringe benefits that are not part of a cafeteria plan may be reported on the employee’s Form W-2 as income.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Describe Fringe Benefit Exclusion Rules

Learning Objective:  04-03 Describe Fringe Benefit Exclusion Rules

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

7) Specific fringe benefit exclusion rules are found in Publication 15.

 

Answer:  FALSE

Explanation:  Fringe benefit exclusion rules are published by the IRS in Publication 15b.

Difficulty: 2 Medium

Topic:  Describe Fringe Benefit Exclusion Rules

Learning Objective:  04-03 Describe Fringe Benefit Exclusion Rules

Bloom’s:  Apply

AACSB:  Communication

Accessibility:  Keyboard Navigation

 

8) The most common way to determine the value of fringe benefits is the general valuation rule.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

9) Charitable contributions are an example of post-tax voluntary deductions.

 

Answer:  TRUE

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

10) Under the special accounting rule, benefits provided in the last quarter of the year may be reported during the following year.

 

Answer:  FALSE

Explanation:  Only benefits provided solely during the last two months of the year may be reported during the following year.

Difficulty: 1 Easy

Topic:  Apply Rules for Withholding, Depositing, and Reporting Benefits

Learning Objective:  04-06 Apply Rules for Withholding, Depositing, and Reporting Benefits

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

11) Which of the following deductions may be taken on a pre-tax basis? (Select all that apply.)

  1. A) Cafeteria plan
  2. B) Garnishments
  3. C) Health insurance
  4. D) Retirement plan

 

Answer:  A, C, D

Difficulty: 2 Medium

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Analyze

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

12) According to Bureau of Labor Statistics, what percentage additional compensation is offered in fringe benefits?

  1. A) 10-18%
  2. B) 15-23%
  3. C) 21-29%
  4. D) 25-33%

 

Answer:  D

Difficulty: 1 Easy

Topic:  Define Fringe Benefits within the Context of Payroll

Learning Objective:  04-01 Define Fringe Benefits within the Context of Payroll

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

13) Which of the following is/are hallmarks of fringe benefits? (Select all that apply.)

  1. A) The benefit improves employees’ living conditions.
  2. B) The ability to receive the benefit relates directly to performance.
  3. C) All employees have access to the benefit.
  4. D) Employee welfare remains unaffected by the benefit.

 

Answer:  A, C

Difficulty: 1 Easy

Topic:  Define Fringe Benefits within the Context of Payroll

Learning Objective:  04-01 Define Fringe Benefits within the Context of Payroll

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

14) If a fringe benefit involves a deduction from employee pay, which of the following is true?

  1. A) Employers may only offer the benefit to certain classes of employees.
  2. B) The employee must enroll in direct deposit for their pay.
  3. C) The fringe benefit must be subject to income tax.
  4. D) The amount of the deduction must be listed on the employee’s pay advice.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Define Fringe Benefits within the Context of Payroll

Learning Objective:  04-01 Define Fringe Benefits within the Context of Payroll

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

15) Which of the following may be included as part of an employee’s Section 125 “cafeteria” plan?

  1. A) Medical expenses
  2. B) Tuition expenses
  3. C) Meal expenses
  4. D) Moving expenses

 

Answer:  A

Difficulty: 1 Easy

Topic:  Interpret Cafeteria Plan Types

Learning Objective:  04-02 Interpret Cafeteria Plan Types

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

16) Health Savings Accounts may be used as pre-tax deductions for which type of costs? (Select all that apply.)

  1. A) Child medical expenses
  2. B) Gasoline expenses
  3. C) Long-term medical care expenses
  4. D) Prescription expenses

 

Answer:  A, C, D

Difficulty: 1 Easy

Topic:  Interpret Cafeteria Plan Types

Learning Objective:  04-02 Interpret Cafeteria Plan Types

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

17) Which of the following is an includible medical expense, according to Publication 502? (Select all that apply.)

  1. A) Ambulance service
  2. B) Over-the-counter medicines
  3. C) Hearing aids
  4. D) Braille books and magazines

 

Answer:  A, C, D

Difficulty: 1 Easy

Topic:  Interpret Cafeteria Plan Types

Learning Objective:  04-02 Interpret Cafeteria Plan Types

Bloom’s:  Understand

AACSB:  Diversity

Accessibility:  Keyboard Navigation

 

 

18) Contributions to FSAs in excess of what annual amount are treated as taxable income?

  1. A) $1,660
  2. B) $1,930
  3. C) $2,370
  4. D) $2,650

 

Answer:  D

Difficulty: 1 Easy

Topic:  Interpret Cafeteria Plan Types

Learning Objective:  04-02 Interpret Cafeteria Plan Types

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

19) Which of the following must accompany a Health Savings Account (HSA) to be considered part of a cafeteria plan?

  1. A) Long-term care insurance
  2. B) High-deductible health plan
  3. C) Low-deductible health plan
  4. D) Flexible Savings Agreement

 

Answer:  B

Difficulty: 1 Easy

Topic:  Interpret Cafeteria Plan Types

Learning Objective:  04-02 Interpret Cafeteria Plan Types

Bloom’s:  Understand

AACSB:  Diversity

Accessibility:  Keyboard Navigation

 

20) What differentiates Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)?

  1. A) Amounts contributed to FSAs may not be rolled over from one year to the next.
  2. B) HSAs expire on an annual basis but FSAs continue perpetually.
  3. C) FSAs expire annually but HSAs may be reserved for use late in life.
  4. D) Only HSAs may be deducted from employee on a pre-tax basis.

 

Answer:  C

Difficulty: 2 Medium

Topic:  Interpret Cafeteria Plan Types

Learning Objective:  04-02 Interpret Cafeteria Plan Types

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

21) Which of the following is true about excluded fringe benefits? (Select all that apply.)

  1. A) They must be part of the employer’s cafeteria plan.
  2. B) The cash value of excluded fringe benefits is always taxable.
  3. C) Excluded fringe benefits are not generally a taxable part of employee pay.
  4. D) Excluded fringe benefits are generally not reported on the employee’s W-2.

 

Answer:  C, D

Difficulty: 1 Easy

Topic:  Describe Fringe Benefit Exclusion Rules

Learning Objective:  04-03 Describe Fringe Benefit Exclusion Rules

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

22) According to Publication 15b, what is the annual cash value limit for excluded prizes and awards?

  1. A) $800
  2. B) $1,400
  3. C) $1,600
  4. D) $2,000

 

Answer:  C

Difficulty: 2 Medium

Topic:  Describe Fringe Benefit Exclusion Rules

Learning Objective:  04-03 Describe Fringe Benefit Exclusion Rules

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

23) Under what condition is the fringe benefit of a gym membership taxable?

  1. A) When the employer has on-site facilities that are restricted to employee use.
  2. B) When the employer offers membership to an off-site club at no additional cost to the employee.
  3. C) When the employer has on-site facilities that are open to and used primarily by non-employees.
  4. D) Gym memberships are always taxable.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Describe Fringe Benefit Exclusion Rules

Learning Objective:  04-03 Describe Fringe Benefit Exclusion Rules

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

24) Which of the following is true about the employee tax treatment of employer-provided snacks and meals?

  1. A) Occasionally provided snacks and meals are not taxable.
  2. B) Snacks and meals provided on a regular basis are not taxable.
  3. C) Holiday parties and meals provided at special gatherings are always taxable.
  4. D) All employer-provided snacks and meals are taxable.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Describe Fringe Benefit Exclusion Rules

Learning Objective:  04-03 Describe Fringe Benefit Exclusion Rules

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

25) What method(s) may be used to determine the fair market value of the personal use of a company car? (Select all that apply.)

  1. A) Appraised value rule
  2. B) Commuting rule
  3. C) Cents-per-mile rule
  4. D) Replacement value rule

 

Answer:  B, C

Difficulty: 2 Medium

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

26) Under the lease-value rule, how is the taxable income for the employee determined? (Select all that apply.)

  1. A) Use the annual lease value amount for the vehicle from Publication 15b.
  2. B) Multiply the lease amount by the percent of business usage of the vehicle.
  3. C) Subtract the dollar amount of the fuel used.
  4. D) Multiply the lease amount by the percent of personal usage of the vehicle.

 

Answer:  A, D

Difficulty: 2 Medium

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

27) Michael McBride is an employee of Reach-it Pharmaceuticals. His company car is a 2017 Lexus GS 200t with a fair-market value of $50,000 and a lease value of $13,250, according to Publication 15-b. During the year, Michael drove 45,000 miles, of which 9,000 were for personal use. The car was available for use on 270 of the days during the year. All gasoline was provided by the employer and is charged back to Michael at $0.055 per mile. What is the amount of the company-car fringe benefit that will appear on Michael’s W-2, using the lease-value rule? (Do not round intermediate calculations, only round final answer to two decimal points.)

  1. A) $2,742.77
  2. B) $2,455.27
  3. C) $2,156.87
  4. D) $1,960.27

 

Answer:  B

Explanation:

Annual Lease

Value

 Days available for use Total days

during the year

 Prorated annual lease % Prorated annual lease value
$13,250.00 270 365 0.739726 $9,801.37

 

% of personal use during year Personal annual lease value Fuel value Total Personal use

taxable income
20% $1,960.27 $495.00 $2,455.27

 

Difficulty: 3 Hard

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Evaluate

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

28) Frances McNale is an employee who drives a 2017 Ford C-Max with a fair-market value of $29,500. The lease value is $7,750, according to Publication 15-b. If the car was available for 150 days during the year, what is the prorated annual lease percentage, using the lease-value rule? (Do not round intermediate calculations, only round final answer to two decimal points.)

  1. A) 35.63%
  2. B) 39.82%
  3. C) 41.10%
  4. D) 42.39%

 

Answer:  C

Explanation:

Days available for use Total days during the year Prorated annual lease %
150 365 41.10%

 

Difficulty: 2 Medium

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

29) Luis Billiot is an employee of Plato Designs and drives a 2017 Toyota Camry as a company car. The fair-market value of the car is $25,499 and the lease value is $6,850, according to Publication 15-b. The car has been available for 300 days during the year and Luis has driven 5,500 of the 28,350 miles for personal use. He pays for his own fuel. What is the percentage of miles driven for personal use, using the lease-value rule? (Do not round intermediate calculations, only round final answer to two decimal points.)

  1. A) 82.19%
  2. B) 14.50%
  3. C) 19.40%
  4. D) 17.64%

 

Answer:  C

Explanation:

Personal miles driven Total miles driven % of personal use
5,500 28,350 19.40%

 

Difficulty: 2 Medium

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

30) Luis Billiot is an employee of Plato Designs and drives a 2017 Toyota Camry as a company car. The fair-market value of the car is $25,499 and the lease value is $6,850, according to Publication 15-b. The car has been available for 300 days during the year and Luis has driven 5,500 of 28,350 miles for personal use. He pays for his own fuel. What is the amount of the company-car fringe benefit that will appear on Luis’s W-2, using the lease-value rule? (Do not round intermediate calculations, only round final answer to two decimal points.)

  1. A) $1,252.48
  2. B) $1,092.27
  3. C) $875.14
  4. D) $546.13

 

Answer:  B

Explanation:

Annual Lease

Value

 Days available for use Total days

during the year

 Prorated annual lease % Prorated annual lease value
$6,850.00 300 365 82.19% $5,630.14

 

% of personal use during year Personal annual lease value Fuel value Total Personal use

taxable income
19.40% $1,092.27 $0.00 $1,092.27

 

Difficulty: 3 Hard

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

31) Frances McNale is an employee who drives a 2017 Ford C-Max with a fair-market value of $29,500. The lease value is $7,750, according to Publication 15-b. The car was available for 150 days during the year, and she reported that 6,500 of the 27,850 miles were driven for personal purposes. The company pays for all fuel and is charged back to Frances at $0.055 per mile. What is the amount of the company-car fringe benefit that will appear on Frances’s W-2, using the lease-value rule? (Do not round intermediate calculations, only round final answer to two decimal points.)

  1. A) $1,100.84
  2. B) $1,020.44
  3. C) $743.34
  4. D) $964.24

 

Answer:  A

Explanation:

Annual Lease

Value

 Days available for use Total days

during the year

 Prorated annual lease % Prorated annual lease value
$7,750.00 150 365 41.10% $3,184.93

 

% of personal use during year Personal annual lease value Fuel value Total Personal use

taxable income
23.34% $743.34 $357.50 $1,100.84

 

Difficulty: 3 Hard

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

32) What is the primary difference between the lease-value rule and the commuter rule as they pertain to the valuation of a company car fringe benefit?

  1. A) The lease-value rule must be used for IRS reporting.
  2. B) The commuter rule considers all mileage driven as personal.
  3. C) The lease-value rule is only for internal company use.
  4. D) The commuter rule forbids personal use of the company vehicle.

 

Answer:  D

Difficulty: 1 Easy

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Analyze

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

 

33) Hattie Bowers is a government employee who is provided a car for commuting and other work-related purposes only. In the last calendar year, her commute is 8 miles each way and she worked 220 days. What is the amount of the company-car fringe benefit that will appear on her W-2? (Do not round intermediate calculations.)

  1. A) $2,140.00
  2. B) $2,640.00
  3. C) $4,680.00
  4. D) $5,280.00

 

Answer:  D

Explanation:

# miles driven for daily commute # days worked

during year

 Total commuter

miles/year

 Value of fringe

benefit
16 220 3520 $5,280.00

 

Difficulty: 2 Medium

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Analyze

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

34) Tanesha works part-time for a governmental agency and is given a car for work-related and commute purposes. During the last calendar year, she worked 150 days and had a commute of 35 miles each direction. What is the amount of the company-car fringe benefit that will appear on her W-2? (Do not round intermediate calculations, only round final answer to two decimal points.)

  1. A) $15,750.00
  2. B) $3,937.50
  3. C) $7,875.00
  4. D) $5,906.25

 

Answer:  A

Explanation:

# miles driven for daily commute # days worked

during year

 Total commuter

miles/year

 Value of fringe

benefit
70 150 10500 $15,750.00

 

Difficulty: 2 Medium

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Evaluate

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

35) Ronald Ferrer is an employee who drives a 2017 Chevrolet Malibu as a company car. The fair-market value of the car is $23,175. He has been given the choice to have his fringe benefit reported on his W-2 either using the lease-value rule or the cents-per mile rule. According to Publication 15-b, the lease value is $6,350. He has driven 2,500 miles for personal use and 23,500 miles in total during the year. The car has been available for use on 250 days during the year. Ronald’s employer pays for all fuel. What method and valuation will yield the lowest fringe-benefit amount for Ronald? (Do not round intermediate calculations, only round final answer to two decimal points.)

  1. A) Lease-value, $1,362.50
  2. B) Cents-per-mile, $1,362.50
  3. C) Lease-value, $600.19
  4. D) Cents-per-mile, $600.19

 

Answer:  C

Explanation:  Lease-value method

 

Annual Lease

Value

 Days available for use Total days

during the year

 Prorated annual lease % Prorated annual lease value
$6,350.00 250 365 68.49% $4,349.32

 

% of personal use during year Personal annual lease value Fuel value Total Personal use

taxable income
10.64% $462.69 $137.50 $600.19

 

Cents per mile

 

Personal miles driven Cents per mile Total Personal use taxable income
2,500 0.545 $1,362.50

 

Difficulty: 3 Hard

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Evaluate

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

36) Lakiesha is an employee who drives a 2017 Buick Verano as a company car. The fair-market value of the car is $28,545. She has been given the choice to have her fringe benefit reported on her W-2 either using the lease-value rule or the cents-per mile rule. According to Publication 15-b, the lease value is $7,750. She has driven 4,500 miles for personal use and 31,250 miles in total during the year. The car has been available for use on 200 days during the year. Lakiesha’s employer pays for all fuel. What method and valuation will yield the lowest fringe-benefit amount for Lakiesha? (Do not round intermediate calculations, only round final answer to two decimal points.)

  1. A) Lease-value, $859.01
  2. B) Cents-per-mile, $859.01
  3. C) Lease value, $2,452.50
  4. D) Cents-per-mile, $2,452.50

 

Answer:  A

Explanation:  Lease-value rule

 

Annual Lease

Value

 Days available for use Total days

during the year

 Prorated annual lease % Prorated annual lease value
$7,750.00 200 365 54.79% $4,246.58

 

% of personal use during year Personal annual lease value Fuel value Total Personal use

taxable income
14.40% $611.51 $247.50 $859.01

 

Cents-per-mile rule

 

Personal miles driven Cents per mile Total Personal use taxable income
4,500 0.545 $2,452.50

 

Difficulty: 3 Hard

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Evaluate

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

37) Which fringe benefit valuation rule(s) permit employees to use a company vehicle for personal purposes as a fringe benefit? (Select all that apply.)

  1. A) Lease-value rule
  2. B) Cents-per-mile rule
  3. C) Commuter rule
  4. D) Mileage reimbursement rule

 

Answer:  A, B

Difficulty: 1 Easy

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

38) Under the unsafe conditions rule:

  1. A) An employee may use a company vehicle for a one-way commute.
  2. B) Employees may only use company cars if their normal travel mode is unsafe.
  3. C) Employees may leave work at any time.
  4. D) Employees are charged $1.50 for the one-way commute.

 

Answer:  D

Difficulty: 1 Easy

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

39) Ross is a full-time employee in Provo, Utah, who earns $42,000 annually, paid semimonthly. His federal income tax is $155.00. What is the maximum amount that may be withheld from his pay for a child-support garnishment, assuming he is not in arrears? (Do not round intermediate calculations, only round final answer to two decimal points. Utah has a 5% flat tax.)

  1. A) $365.28
  2. B) $686.81
  3. C) $584.45
  4. D) $876.68

 

Answer:  B

Explanation:

Annual Salary Period

wage/salary

 Federal income

tax

 State income

tax

 FICA tax Disposable income Maximum garnishment  
$42,000.00 $1,750.00 $155.00 $87.50 $133.88 $1,373.63 $686.81  

 

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Analyze

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

40) According to the Consumer Credit Protection Act, what is the maximum percentage of an employee’s disposable earnings that may be withheld as part of a consumer credit garnishment?

  1. A) 25%
  2. B) 35%
  3. C) 50%
  4. D) 40%

 

Answer:  A

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Remember

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

41) Which of the following, according to the IRS, is used to determine if a health plan qualifies for pre-tax status? (Select all that apply.)

  1. A) An employer’s self-insured plan
  2. B) COBRA health coverage
  3. C) Cancer and accident policies
  4. D) Retiree health coverage

 

Answer:  A, B, D

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

42) The primary difference between pre-tax and post-tax deductions is:

  1. A) Post-tax deductions reduce tax obligations.
  2. B) Pre-tax deductions include child support.
  3. C) Pre-tax deductions reduce tax liability.
  4. D) Post-tax deductions reduce gross pay.

 

Answer:  C

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

43) What is the purpose of pre-tax deductions?

  1. A) To reduce the amount of tax revenue available
  2. B) To reduce the financial burden on families
  3. C) To reduce the financial burden on employers
  4. D) To support proactive health care

 

Answer:  B

Difficulty: 2 Medium

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Analyze

AACSB:  Analytical Thinking; Diversity

Accessibility:  Keyboard Navigation

 

 

44) According to the Affordable Health Care Act, employers with ________ or more employees are required to file an informational return with the IRS and a detailed summary to the employees.

  1. A) 10
  2. B) 50
  3. C) 100
  4. D) 150

 

Answer:  B

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

45) Employer contributions to employee health insurance must be:

  1. A) Added to Federal taxable wages.
  2. B) Reported in Social Security wages.
  3. C) Reported in State taxable wages.
  4. D) Reported in Box 12, Code DD.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

46) What is true about long-term disability insurance?

  1. A) It is always included in taxable income.
  2. B) It is subject to Social Security taxes.
  3. C) It is subject to Medicare taxes.
  4. D) It may be deducted on either a pre-or post-tax basis.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

47) Which of the following are post-tax deductions? (Select all that apply.)

  1. A) Employee contributions to gym memberships
  2. B) Employee contributions to 401(k) plans
  3. C) Employee contributions to charitable organizations
  4. D) Employee contributions to union dues

 

Answer:  A, C, D

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

48) Under the Affordable Care Act, what are the rules for dependents to be covered under a parent’s health plan? (Select all that apply.)

  1. A) The dependent must be under the age of 21.
  2. B) The parent must be an employee covered by a qualified cafeteria plan.
  3. C) Dependents under the age of 26 are covered.
  4. D) All employer-sponsored health plans qualify.

 

Answer:  B, C

Difficulty: 2 Medium

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

49) If an employer paid for its employees’ long-term care insurance premiums, who determines the effect on the employees’ gross pay?

  1. A) The IRS
  2. B) The state in which the business is located
  3. C) The employee
  4. D) The employer

 

Answer:  D

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

50) What is the difference between a defined benefit and a defined contribution retirement plan?

  1. A) Defined contribution plans allow employees to contribute a set amount toward their retirement plan while employed.
  2. B) Defined contribution plans allow employees to determine a specific amount of money they wish to receive upon retirement.
  3. C) Defined benefit plans limit employee contributions while employed.
  4. D) Defined benefit plans allow employees to set aside money on a tax-exempt basis.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

51) Which of the following are examples of defined contribution plans? (Select all that apply.)

  1. A) IRA
  2. B) Pension
  3. C) SIMPLE
  4. D) 403(b)

 

Answer:  A, C, D

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

52) Which of the following is true about 401(k) retirement plans?

  1. A) All 401(k) plans are cafeteria plans.
  2. B) 401(k) plans are exempt from all payroll taxes.
  3. C) 401(k) plans always reduce income tax liability.
  4. D) 401(k) plans are usually subject to FICA taxes.

 

Answer:  D

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

 

53) What is the major limitation of a SIMPLE retirement plan?

  1. A) It is limited to firms with 100 or fewer employees.
  2. B) Employee contributions to the plan are limited.
  3. C) SIMPLE plans are subject to all payroll taxes.
  4. D) SIMPLE plan funds must be invested in stock market securities.

 

Answer:  A

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

54) What differentiates 401(k) and a 403(b) retirement plans?

  1. A) 401(k) plans are limited to companies with more than 100 employees.
  2. B) 403(b) plans are subject to all payroll taxes.
  3. C) 401(k) plans may not be invested in stock-market funds.
  4. D) 403(b) plans are offered by non-profit employers.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

55) Which of the following is an example of a post-tax mandated deduction? (Select all that apply.)

  1. A) Charitable contributions
  2. B) Garnishments
  3. C) Credit card liens
  4. D) Tax liens

 

Answer:  B, C, D

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

56) According to Consumer Credit Protection Act, what is a limit on the amount of a garnishment for consumer credit?

  1. A) It must be less than 50% of an employee’s gross earnings.
  2. B) It may be 75% of the employee’s disposable income.
  3. C) It must be a minimum of 10% of an employee’s annual salary.
  4. D) It cannot exceed 25% of an employee’s disposable income.

 

Answer:  D

Difficulty: 2 Medium

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Apply

AACSB:  Analytical Thinking

Accessibility:  Keyboard Navigation

 

57) What is a limit on garnishments for nontax liens?

  1. A) It may not exceed 15% of an employee’s disposable income.
  2. B) It may be up to 50% of an employee’s disposable income.
  3. C) An additional 5% may be added for any lien payments in arrears.
  4. D) It may not exceed 30 times the federal minimum wage.

 

Answer:  A

Difficulty: 2 Medium

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

58) What is the term for a tax-favorable IRA is set up by or for the employee, and the employer contributes the funds into the account?

  1. A) IRA
  2. B) SIMPLE
  3. C) ESOP
  4. D) SEP

 

Answer:  D

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

59) In which type of retirement plan does the company offer employees the ability to earn company stock for the duration of their employment?

  1. A) SEP
  2. B) SIMPLE
  3. C) ESOP
  4. D) 401(k)

 

Answer:  C

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

60) By what date must the value of all noncash benefits be determined for the preceding year?

  1. A) December 31
  2. B) January 31
  3. C) February 28
  4. D) March 31

 

Answer:  B

Difficulty: 1 Easy

Topic:  Apply Rules for Withholding, Depositing, and Reporting Benefits

Learning Objective:  04-06 Apply Rules for Withholding, Depositing, and Reporting Benefits

Bloom’s:  Understand

AACSB:  Communication

Accessibility:  Keyboard Navigation

 

61) As a general rule, when should the employer deposit money associated with employee benefits?

  1. A) When the employee demands the benefit.
  2. B) When the benefit is made available.
  3. C) Immediately upon receipt.
  4. D) When other tax deposits are made.

 

Answer:  B

Difficulty: 2 Medium

Topic:  Apply Rules for Withholding, Depositing, and Reporting Benefits

Learning Objective:  04-06 Apply Rules for Withholding, Depositing, and Reporting Benefits

Bloom’s:  Apply

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

62) Retirement fund contributions are generally subject to ________ and ________ taxes.

  1. A) Federal withholding; State withholding
  2. B) Federal withholding; Social Security
  3. C) Social Security; Medicare
  4. D) Federal withholding; Medicare

 

Answer:  C

Difficulty: 3 Hard

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Evaluate

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

63) The ________ determines when benefit amounts should be withheld from employee pay.

  1. A) employee
  2. B) employer
  3. C) IRS
  4. D) State in which the business is conducted

 

Answer:  B

Difficulty: 1 Easy

Topic:  Apply Rules for Withholding, Depositing, and Reporting Benefits

Learning Objective:  04-06 Apply Rules for Withholding, Depositing, and Reporting Benefits

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

64) Under the ________, benefits offered only during the last two months of the year may be treated as paid during the following calendar year.

  1. A) Special accounting rule
  2. B) IRS Publication 15
  3. C) ERISA
  4. D) Benefits valuation rule

 

Answer:  A

Difficulty: 1 Easy

Topic:  Apply Rules for Withholding, Depositing, and Reporting Benefits

Learning Objective:  04-06 Apply Rules for Withholding, Depositing, and Reporting Benefits

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

65) What options do employers have regarding taxable fringe benefits? (Select all that apply.)

  1. A) Add it to the employee’s W-2 in one lump sum.
  2. B) Add it to a single pay period and tax it at the 25% income tax rate.
  3. C) Add the value of the fringe benefit to period pay and tax it at that time.
  4. D) Add it as a line item for employees to remit individually.

 

Answer:  A, C

Difficulty: 2 Medium

Topic:  Apply Rules for Withholding, Depositing, and Reporting Benefits

Learning Objective:  04-06 Apply Rules for Withholding, Depositing, and Reporting Benefits

Bloom’s:  Apply

AACSB:  Communication

Accessibility:  Keyboard Navigation

 

66) The reporting of employee benefits occurs on the ________ and the ________. (Select all that apply.)

  1. A) Form W-2
  2. B) Payroll register
  3. C) Total compensation report
  4. D) Form W-4

 

Answer:  A, C

Difficulty: 1 Easy

Topic:  Apply Rules for Withholding, Depositing, and Reporting Benefits

Learning Objective:  04-06 Apply Rules for Withholding, Depositing, and Reporting Benefits

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

67) The purpose of fringe benefits is to ________.

  1. A) reduce taxable compensation
  2. B) entice employee engagement
  3. C) avoid cash outlays for employee benefits
  4. D) defer tax obligations

 

Answer:  B

Difficulty: 1 Easy

Topic:  Define Fringe Benefits within the Context of Payroll

Learning Objective:  04-01 Define Fringe Benefits within the Context of Payroll

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

68) Over ________ of U.S. employees report that fringe benefits affect their choice of employers.

  1. A) 10%
  2. B) 25%
  3. C) 40%
  4. D) 50%

 

Answer:  D

Difficulty: 1 Easy

Topic:  Define Fringe Benefits within the Context of Payroll

Learning Objective:  04-01 Define Fringe Benefits within the Context of Payroll

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

69) Post-Tax Deductions are amounts ________.

  1. A) that are voluntarily chosen by the employee
  2. B) that the employer chooses to withhold after assessing the employee’s tax liability
  3. C) includes both mandatory and voluntary deductions
  4. D) are only mandatory deductions like garnishments and union dues

 

Answer:  C

Difficulty: 1 Easy

Topic:  Differentiate between Pre-Tax and Post-Tax Deductions

Learning Objective:  04-05 Differentiate between Pre-Tax and Post-Tax Deductions

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

70) ________ benefits are fringe benefits with minimal value.

  1. A) Minimal
  2. B) De minimis
  3. C) De normal
  4. D) Mandatory

 

Answer:  B

Difficulty: 1 Easy

Topic:  Define Fringe Benefits within the Context of Payroll

Learning Objective:  04-01 Define Fringe Benefits within the Context of Payroll

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

71) Publication ________ is the employer’s guide to fringe benefits.

  1. A) 10-a
  2. B) 15-f
  3. C) 15-b
  4. D) 12-c

 

Answer:  C

Difficulty: 1 Easy

Topic:  Define Fringe Benefits within the Context of Payroll

Learning Objective:  04-01 Define Fringe Benefits within the Context of Payroll

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

72) Employers benefit by offering POPs because they reduce ________.

  1. A) income tax liability
  2. B) cash paid to employees
  3. C) FICA tax liability
  4. D) employee turnover

 

Answer:  C

Difficulty: 1 Easy

Topic:  Interpret Cafeteria Plan Types

Learning Objective:  04-02 Interpret Cafeteria Plan Types

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

73) The IRS permits employees to rollover up to ________ in their FSA at the employer’s discretion.

  1. A) $100
  2. B) $250
  3. C) $500
  4. D) $750

 

Answer:  C

Difficulty: 1 Easy

Topic:  Interpret Cafeteria Plan Types

Learning Objective:  04-02 Interpret Cafeteria Plan Types

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

 

74) The cash value of ________ must be included as compensation on the employee’s W-2.

  1. A) occasional meals and snacks
  2. B) gift cards
  3. C) on-site athletic facilities
  4. D) plaques and trophies

 

Answer:  B

Difficulty: 1 Easy

Topic:  Describe Fringe Benefit Exclusion Rules

Learning Objective:  04-03 Describe Fringe Benefit Exclusion Rules

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

 

75) ________ is the price that a person would pay for an item in an arm’s length transaction.

  1. A) General valuation
  2. B) Manufacturer’s Suggested Retail Price
  3. C) De Minimis
  4. D) Fair Market Value

 

Answer:  D

Difficulty: 1 Easy

Topic:  Explain Fringe Benefit Valuation Rules

Learning Objective:  04-04 Explain Fringe Benefit Valuation Rules

Bloom’s:  Understand

AACSB:  Reflective Thinking

Accessibility:  Keyboard Navigation

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