APA Fundamental Payroll Certification FPC-Remote Exam Practice Test

Answer : D

Proper documentation ensures uniformity in payroll and HR operations by standardizing processes.

Conformity (C) refers to compliance but does not guarantee process standardization.

Responsibility (A) and adaptability (B) are important but not the primary reason for documentation.

Payroll Process Standardization Guide (Payroll.org)

Answer : D

Comprehensive and Detailed Explanation:

Gross Pay Calculation:

Hourly Rate Hours Worked = $10.00 40 = $400.00

Taxable Wages:

Gross Pay: $400.00

Pre-Tax Deductions: $50 (Medical) + $10 (Dental) + $25 (401k) = $85.00

Taxable Wages = $400 - $85 = $315.00

Federal Income Tax Withholding (Wage Bracket Method):

Based on IRS tables for single filers, FIT = approx. $20.00

Social Security & Medicare Taxes:

Social Security (6.2%) = $400 6.2% = $24.80

Medicare (1.45%) = $400 1.45% = $5.80

Total Deductions:

$20.00 (FIT) + $24.80 (SS) + $5.80 (Medicare) + $25.00 (Union Dues) = $75.60

Net Pay:

$400 - $75.60 = $259.99

Thus, the correct answer is D. $259.99.

IRS Publication 15-T -- Wage Bracket Withholding Method

Payroll.org -- Payroll Tax Calculation Guidelines

Answer : A

Comprehensive and Detailed Explanation:

Internal controls are processes used to ensure accuracy, security, and compliance in payroll operations. Effective internal controls include:

Option B (Segregating job duties) Prevents fraud by ensuring no one person has full control over payroll.

Option C (Rotating job duties) Reduces fraud risk and enhances cross-training.

Option D (Restricting system access) Protects sensitive payroll data.

Option A (Storing backup files on-site) is incorrect because internal control best practices recommend off-site or cloud backups to protect against data loss from disasters.

Payroll.org -- Payroll Internal Control Procedures

IRS -- Best Practices for Payroll Security

Answer : A

Comprehensive and Detailed Explanation:

To properly reconcile payroll tax liability accounts, the following steps are performed:

Compare account entries against payroll registers (C) -- Ensures wages, deductions, and taxes are posted correctly.

Verify checks issued by accounts payable (B) -- Confirms tax payments were made.

Match account activity with quarterly tax returns (D) -- Ensures payroll taxes were reported correctly on Form 941.

Option A (Entries from company accountants) is incorrect because accountants do not create payroll entries; payroll is recorded based on actual payroll transactions, not estimates or adjustments from accountants.

GAAP Accounting Standards -- Payroll Tax Liability Reconciliation

Payroll.org -- Best Practices for Payroll Tax Account Reconciliation

Answer : C

Comprehensive and Detailed Explanation:

Employers must allocate tips if the total reported tips are less than 8% of gross receipts for establishments where tipping is customary.

Allocated tips are reported on Form W-2, Box 8 (Option C) but are NOT subject to withholding.

Option A is incorrect because allocated tips are not subject to automatic withholding unless voluntarily reported by the employee.

Option B is incorrect because employers are responsible for accurate tip reporting.

Option D is incorrect because tip allocation rules require reporting when applicable.

IRS Publication 531 -- Reporting Tip Income

Payroll.org -- Employer Tip Allocation Rules

Answer : A

Comprehensive and Detailed Explanation:

Annual payroll reconciliation ensures that payroll records match tax filings. The best practice is to start reconciliation after completing the W-2 audit, as this verifies:

Employee earnings and tax withholdings

Federal and state tax deposits

Year-end adjustments

Option B is incorrect because quarterly reconciliation is separate from annual reconciliation.

Option C is incorrect because reconciliation should start after verifying W-2s, not just at the year-end.

Option D is incorrect because reconciliation should be based on the prior year, not the first payroll of the new year.

IRS -- Year-End Payroll Reporting Guide

Payroll.org -- Annual Reconciliation Best Practices

Answer : D

Comprehensive and Detailed Explanation:

Deferred compensation plans allow employees to defer income taxation until retirement. These include:

401(k) (Option A) -- A private-sector retirement savings plan.

403(b) (Option B) -- A similar plan for nonprofits and schools.

457(b) (Option C) -- A nonqualified deferred compensation plan for government employees.

Option D (501(c)) is incorrect because it refers to tax-exempt organizations under the IRS code, not a deferred compensation plan.

IRS -- Tax Treatment of Deferred Compensation Plans

Payroll.org -- Retirement Plan Payroll Compliance