Question 1

Which of the items is not correct regarding withholding?

Accepted Answer

A)  Employees that also have self employment income can have additional amounts withheld to avoid estimated tax payments.
B)  Employees cannot claim an allowance for a child unless they are entitled to claim the child as a dependent.
C)  Employees can claim exempt and avoid withholding.
D)  Married employees can choose to be withheld at the higher single rates.Additional allowances can be claimed for many purposes (e.g. ,large itemized deductions)  in addition to personal and dependency exemptions.E) A) and B)
F) C) and D)

Question 2

Employees will always prefer to receive incentive stock options over nonqualified stock options.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is true regarding excess Social Security contributions by an employer?

Accepted Answer

A)  Excess contributions are treated as additional income tax withholding payments.
B)  A second employer can stop withholding once an employee's total contributions reach the Social Security wage base.
C)  The Treasury returns excess Social Security Withholding to employers.
D)  Excess contributions are treated as voluntary contributions to the Treasury.Excess payments are treated as additional voluntary contributions to the Treasury.E) B) and D)
F) All of the above

Question 4

Lara,a single taxpayer with a 30 percent marginal tax rate,desires health insurance.The health insurance would cost Lara $5,000 to purchase if she pays for it herself (Lara's AGI is too high to receive any tax deduction for the insurance as a medical expense)  .Lara's employer has a 40 percent marginal tax rate.Ignoring payroll taxes,what is the maximum amount of before-tax salary Lara would give up to receive health insurance?

Accepted Answer

A)  $1,500.
B)  $5,000.
C)  $7,143.
D)  $8,333.$5,000/(1 - .3)  .E) B) and C)
F) A) and B)

Question 5

Tom recently received 2,000 shares of restricted stock from his employer,Independence Corporation,when the share price was $10 per share.Tom's restricted shares vested three years later when the market price was $14.Tom held the shares for a little more than a year and sold them when the market price was $12.What is the amount of Tom's income or loss on the sale?

Accepted Answer

A)  $0
B)  $2,000 loss
C)  $4,000 gain
D)  $4,000 lossE) None of the above
F) A) and B)

Question 6

Up to $10,000 of dependent care expenses can be excluded from an employee's compensation.The limit is $5,000.

Accepted Answer

A) True 
 B)False

Question 7

Employers computing taxable income under the accrual method may deduct wages accrued as compensation expense in one year and paid in the subsequent year,as long as the company makes the payment within 2½ months after the employer's year-end.

Accepted Answer

A) True 
 B)False

Question 8

The date on which stock options are given to the employee is called the exercise date.The grant date is the date employees are initially allocated stock options.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following items is not included on an employee's Form W-2?

Accepted Answer

A)  Taxable wages,tips,and compensation
B)  Social Security withholding
C)  Value of stock options granted during the year
D)  Federal and state income tax withholdingE) A) and D)
F) A) and C)

Question 10

Employers cannot discriminate between highly and non-highly compensated employees when providing taxable fringe benefits.

Accepted Answer

A) True 
 B)False

Question 11

Tom recently received 2,000 shares of restricted stock from his employer,Independence Corporation,when the share price was $10 per share.Tom's restricted shares vested three years later when the market price was $14.Tom held the shares for a little more than a year and sold them when the market price was $20.What is the amount of Tom's income or loss on the vesting date?

Accepted Answer

A)  $0.
B)  $10,000.
C)  $20,000.
D)  $28,000.2,000 × $14 (market price on vesting date)  .E) B) and C)
F) A) and D)

Question 12

Which of the following is a fringe benefit that employers can discriminate among employees?

Accepted Answer

A)  No additional cost service.
B)  Qualified employee discount.
C)  Qualified transportation fringe.
D)  Employee educational assistance.See Exhibit 12-13.E) None of the above
F) All of the above

Question 13

Which of the following statements regarding employer provided educational benefits is true?

Accepted Answer

A)  All undergraduate tuition expenses can be excluded.
B)  Only educational benefits from public universities can be excluded.
C)  Up to $5,250 in tuition benefits can be excluded.
D)  All graduate tuition expenses are included.An annual benefit of $5,250 can be excluded.E) A) and D)
F) C) and D)

Question 14

An employee's income with respect to restricted stock is the fair market value on the vesting date.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following does not qualify as a "for the convenience of the employer" nontaxable fringe benefit?

Accepted Answer

A)  The fair market value of the rent of an apartment manager living on the premises.
B)  An overtime meal provided to an employee while working late.
C)  A meal provided by a hospital to residents during their shift.
D)  A company picnic.The value of a company picnic is a nontaxable fringe benefit,but it is not a "for the convenience of the employer" benefit.E) None of the above
F) A) and B)

Question 16

Which of the following is not an example of a nontaxable fringe benefit?

Accepted Answer

A)  Monthly employer provided transit benefit of $100.
B)  Group-term life insurance policy providing $100,000 of coverage.
C)  Employer provided parking of $100 per month.
D)  Qualified employee discounts.Only $50,000 of group-term life insurance qualifies as a nontaxable fringe benefit.E) B) and D)
F) A) and D)

Question 17

Kevin is the financial manager of Levingston BMW.The shop allows employees to purchase up to two vehicles at a discount.This year Kevin purchased a 530 model and a new M3.  If the average gross profit percentage of the shop's goods is 12%,what amount must Kevin include in income?

Accepted Answer

A)  $0
B)  $1,640
C)  $3,000
D)  $17,000E) All of the above
F) A) and D)

Question 18

Which of the following isn't done by Form W-2?

Accepted Answer

A)  Summarizes the employee's taxable salary and wages.
B)  Provides annual Federal and state withholding information.
C)  Indicates whether an employee had more than one employer during the year.
D)  Generated by an employer annually.The W-2 only provides information about the employer providing the statement.E) All of the above
F) None of the above

Question 19

Maren received 10 NQOs (each option gives her the right to purchase 10 shares of stock for $8 per share)  at the time she started working when the stock price was $6 per share.When the share price was $15 per share,she exercised all of her options.Eighteen months later she sold all of the shares for $20 per share.How much gain will Maren recognize on the sale and how much tax will she pay assuming her marginal tax rate is 35 percent?

Accepted Answer

A)  $0 gain and $0 tax.
B)  $500 gain and $75 tax.
C)  $500 gain and $175 tax.
D)  $1,200 gain and $180 tax.The gain realized is $500 (100 shares × $20)  less basis (100 shares × $15 exercise price)  .The tax is calculated as follows: $500 × 15% (preferential rate)  .E) A) and C)
F) C) and D)

Question 20

On Form W-4,an employee can only claim one allowance for each personal or dependency exemption that will be claimed on the employee's income tax return.

Accepted Answer

A) True 
 B)False

Exam 12: Compensation

Employers cannot discriminate between highly and non-highly compensated employees when providing taxable fringe benefits.

Correct Answer
verified

Kevin is the financial manager of Levingston BMW.The shop allows employees to purchase up to two vehicles at a discount.This year Kevin purchased a 530 model and a new M3. If the average gross profit percentage of the shop's goods is 12%,what amount must Kevin include in income?

Correct Answer
verified

Which of the following isn't done by Form W-2?

Correct Answer
verified

Employees will always prefer to receive incentive stock options over nonqualified stock options.

Correct Answer
verified

Which of the following statements regarding employer provided educational benefits is true?

Correct Answer
verified

Employers computing taxable income under the accrual method may deduct wages accrued as compensation expense in one year and paid in the subsequent year,as long as the company makes the payment within 2½ months after the employer's year-end.

Correct Answer
verified

The date on which stock options are given to the employee is called the exercise date.The grant date is the date employees are initially allocated stock options.

Correct Answer
verified

Which of the following statements is true regarding excess Social Security contributions by an employer?

Correct Answer
verified

Up to $10,000 of dependent care expenses can be excluded from an employee's compensation.The limit is $5,000.

Correct Answer
verified

Correct Answer
verified

Which of the following is a fringe benefit that employers can discriminate among employees?

Correct Answer
verified

On Form W-4,an employee can only claim one allowance for each personal or dependency exemption that will be claimed on the employee's income tax return.

Correct Answer
verified

Correct Answer
verified

Which of the following is not an example of a nontaxable fringe benefit?

Correct Answer
verified

Correct Answer
verified

An employee's income with respect to restricted stock is the fair market value on the vesting date.

Correct Answer
verified

Which of the following does not qualify as a "for the convenience of the employer" nontaxable fringe benefit?

Correct Answer
verified

Which of the items is not correct regarding withholding?

Correct Answer
verified

Which of the following items is not included on an employee's Form W-2?

Correct Answer
verified

Correct Answer
verified

Exam 12: Compensation

Employers cannot discriminate between highly and non-highly compensated employees when providing taxable fringe benefits.

Correct AnswerverifiedShow Answer

Kevin is the financial manager of Levingston BMW.The shop allows employees to purchase up to two vehicles at a discount.This year Kevin purchased a 530 model and a new M3. If the average gross profit percentage of the shop's goods is 12%,what amount must Kevin include in income?

Correct AnswerverifiedShow Answer

Which of the following isn't done by Form W-2?

Correct AnswerverifiedShow Answer

Employees will always prefer to receive incentive stock options over nonqualified stock options.

Correct AnswerverifiedShow Answer

Which of the following statements regarding employer provided educational benefits is true?

Correct AnswerverifiedShow Answer

Employers computing taxable income under the accrual method may deduct wages accrued as compensation expense in one year and paid in the subsequent year,as long as the company makes the payment within 2½ months after the employer's year-end.

Correct AnswerverifiedShow Answer

The date on which stock options are given to the employee is called the exercise date.The grant date is the date employees are initially allocated stock options.

Correct AnswerverifiedShow Answer

Which of the following statements is true regarding excess Social Security contributions by an employer?

Correct AnswerverifiedShow Answer

Up to $10,000 of dependent care expenses can be excluded from an employee's compensation.The limit is $5,000.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is a fringe benefit that employers can discriminate among employees?

Correct AnswerverifiedShow Answer

On Form W-4,an employee can only claim one allowance for each personal or dependency exemption that will be claimed on the employee's income tax return.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Which of the following is not an example of a nontaxable fringe benefit?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

An employee's income with respect to restricted stock is the fair market value on the vesting date.

Correct AnswerverifiedShow Answer

Which of the following does not qualify as a "for the convenience of the employer" nontaxable fringe benefit?

Correct AnswerverifiedShow Answer

Which of the items is not correct regarding withholding?

Correct AnswerverifiedShow Answer

Which of the following items is not included on an employee's Form W-2?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified