Question 1

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

Accepted Answer

A)  Personal use of corporate jet. 
B)  $1,000,000 group term life insurance policy. 
C)  $225 of employer provided parking. 
D)  Automobile allowance. 
A)  Personal use of corporate jet. 
B)  $1,000,000 group term life insurance policy. 
C)  $225 of employer provided parking. 
D)  Automobile allowance. C

Question 2

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

Accepted Answer

A) True 
 B)False  False

Question 3

Qualified employee discounts allow employees to purchase employer goods at a discount.

Accepted Answer

A) True 
 B)False  True

Question 4

Lara, a single taxpayer with a 32 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 21 percent marginal tax rate. Ignoring payroll taxes, what is the maximum amount of before-tax salary Lara would give up to receive health insurance? (Round your answer to the nearest whole number)

Accepted Answer

A)  $1,600. 
B)  $5,000. 
C)  $7,353. 
D)  $15,625. 
A)  $1,600. 
B)  $5,000. 
C)  $7,353. 
D)  $15,625.

Question 5

Which of the items is not correct regarding withholding?

Accepted Answer

A)  Employees that also have self-employment income can have additional amounts of federal tax 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 status and avoid withholding. 
D)  Married employees can choose to have income tax withholding on wages withheld at the higher single rates. 
A)  Employees that also have self-employment income can have additional amounts of federal tax 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 status and avoid withholding. 
D)  Married employees can choose to have income tax withholding on wages withheld at the higher single rates.

Question 6

Which of the following statements regarding compensation is False?

Accepted Answer

A)  Wages are usually paid by the hour. 
B)  Salary is usually a form of fixed compensation. 
C)  Bonuses are a form of compensation obtained if certain criteria are met. 
D)  Bonuses paid within 2½ months of year-end are included in employee's compensation in the year they were earned. 
A)  Wages are usually paid by the hour. 
B)  Salary is usually a form of fixed compensation. 
C)  Bonuses are a form of compensation obtained if certain criteria are met. 
D)  Bonuses paid within 2½ months of year-end are included in employee's compensation in the year they were earned.

Question 7

How is the bargain element for a stock option calculated?

Accepted Answer

A)  The difference between the strike price and the market price on the date of grant. 
B)  The difference between the market price on the exercise date and the market price on the date of grant. 
C)  The difference between the market price on the exercise date and the strike price. 
D)  The difference between the market price on the sale date and the strike price. 
A)  The difference between the strike price and the market price on the date of grant. 
B)  The difference between the market price on the exercise date and the market price on the date of grant. 
C)  The difference between the market price on the exercise date and the strike price. 
D)  The difference between the market price on the sale date and the strike price.

Question 8

Which of the following is not a purpose of equity-based compensation?

Accepted Answer

A)  Provide both risk and incentives to employees. 
B)  Motivate employees by aligning employee and employer incentives. 
C)  Avoid compensation limits for certain publicly traded company executives. 
D)  Provides a low or no cost form of compensation. 
A)  Provide both risk and incentives to employees. 
B)  Motivate employees by aligning employee and employer incentives. 
C)  Avoid compensation limits for certain publicly traded company executives. 
D)  Provides a low or no cost form of compensation.

Question 9

Big Bucks, a publicly traded corporation, paid its CEO $1,500,000 of base compensation for the year. What is the after-tax cost of paying the salary assuming a 21 percent marginal tax rate?

Accepted Answer

$1,290,000

Question 10

Which of the following pairs of items is not needed to calculate the after-tax proceeds for a same-day sale?

Accepted Answer

A)  Strike price and market price on exercise date. 
B)  Strike price and market price on grant date. 
C)  Market price on sale date and market price on exercise date. 
D)  Market price on sale date and marginal tax rate. 
A)  Strike price and market price on exercise date. 
B)  Strike price and market price on grant date. 
C)  Market price on sale date and market price on exercise date. 
D)  Market price on sale date and marginal tax rate.

Question 11

Which of the following refers to the date stock options are awarded to an employee?

Accepted Answer

A)  Grant date. 
B)  Exercise date. 
C)  Lapse date. 
D)  Vesting date. 
A)  Grant date. 
B)  Exercise date. 
C)  Lapse date. 
D)  Vesting date.

Question 12

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 withholding. 
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 withholding.

Question 13

Tanya's employer offers a cafeteria plan that allows employees to choose among a number of benefits. Each employee is allowed $6,000 in benefits. For 2018, Tanya selected $3,360 ($280 per month) of parking, $1,840 in 401(k) contributions, and $800 of cash. How much must Tanya include in taxable income?

Accepted Answer

A)  $0. 
B)  $1,040. 
C)  $1,120. 
D)  $4,000. 
A)  $0. 
B)  $1,040. 
C)  $1,120. 
D)  $4,000.

Question 14

Employers receive a deduction for compensation paid to and employment taxes paid on behalf of employees.

Accepted Answer

A) True 
 B)False

Question 15

Employees complete a Form W-2 to specify their income tax withholding.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following regarding the Form W-4 is incorrect?

Accepted Answer

A)  Determines an employee's income tax withholding. 
B)  Employees can claim more allowances than personal exemptions that will be claimed. 
C)  Employees can specify additional amounts to be withheld each month. 
D)  The form can only be adjusted at the beginning of year or start of employment. 
A)  Determines an employee's income tax withholding. 
B)  Employees can claim more allowances than personal exemptions that will be claimed. 
C)  Employees can specify additional amounts to be withheld each month. 
D)  The form can only be adjusted at the beginning of year or start of employment.

Question 17

Rachel receives employer provided health insurance. The employer's cost of the health insurance is $6,000 annually. What is her employer's after-tax cost of providing the health insurance, assuming that the employer's marginal tax rate is 21 percent and is profitable?

Accepted Answer

A)  $0. 
B)  $1,260. 
C)  $4,740. 
D)  $6,000. 
A)  $0. 
B)  $1,260. 
C)  $4,740. 
D)  $6,000.

Question 18

Health insurance is an example of a nontaxable fringe benefit.

Accepted Answer

A) True 
 B)False

Question 19

The date on which stock options are given to the employee is called the exercise date.

Accepted Answer

A) True 
 B)False

Question 20

One purpose of Form W-4 is to determine an employee's withholding.

Accepted Answer

A) True 
 B)False

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

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

Qualified employee discounts allow employees to purchase employer goods at a discount.

Which of the items is not correct regarding withholding?

Which of the following statements regarding compensation is False?

How is the bargain element for a stock option calculated?

Which of the following is not a purpose of equity-based compensation?

Big Bucks, a publicly traded corporation, paid its CEO $1,500,000 of base compensation for the year. What is the after-tax cost of paying the salary assuming a 21 percent marginal tax rate?

Which of the following pairs of items is not needed to calculate the after-tax proceeds for a same-day sale?

Which of the following refers to the date stock options are awarded to an employee?

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

Employers receive a deduction for compensation paid to and employment taxes paid on behalf of employees.

Employees complete a Form W-2 to specify their income tax withholding.

Which of the following regarding the Form W-4 is incorrect?

Rachel receives employer provided health insurance. The employer's cost of the health insurance is $6,000 annually. What is her employer's after-tax cost of providing the health insurance, assuming that the employer's marginal tax rate is 21 percent and is profitable?

Health insurance is an example of a nontaxable fringe benefit.

The date on which stock options are given to the employee is called the exercise date.

One purpose of Form W-4 is to determine an employee's withholding.

An Introduction to Tax

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters

Exam 12: Compensation

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

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

Qualified employee discounts allow employees to purchase employer goods at a discount.

Which of the items is not correct regarding withholding?

Which of the following statements regarding compensation is False?

How is the bargain element for a stock option calculated?

Which of the following is not a purpose of equity-based compensation?

Big Bucks, a publicly traded corporation, paid its CEO $1,500,000 of base compensation for the year. What is the after-tax cost of paying the salary assuming a 21 percent marginal tax rate?

Which of the following pairs of items is not needed to calculate the after-tax proceeds for a same-day sale?

Which of the following refers to the date stock options are awarded to an employee?

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

Employers receive a deduction for compensation paid to and employment taxes paid on behalf of employees.

Employees complete a Form W-2 to specify their income tax withholding.

Which of the following regarding the Form W-4 is incorrect?

Rachel receives employer provided health insurance. The employer's cost of the health insurance is $6,000 annually. What is her employer's after-tax cost of providing the health insurance, assuming that the employer's marginal tax rate is 21 percent and is profitable?

Health insurance is an example of a nontaxable fringe benefit.

The date on which stock options are given to the employee is called the exercise date.

One purpose of Form W-4 is to determine an employee's withholding.

An Introduction to Tax

Tax Compliance, the IRS, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Dependents, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Filters