FPC-Remote APA Fundamental Payroll Certification Free Practice Exam Questions (2025 Updated)

Comprehensive and Detailed Explanation:Payroll confidentiality ensuresemployee information is only disclosed with proper authorization.

Option A (Payment history with written authorization) is NOT a breachbecause the employee provided consent.

Option C (General ledger costing shared with accounting) is NOT a breachsince accounting requires financial data for compliance.

Option D (Payroll records to legal department) is NOT a breachas legal teams need data for investigations.

Option B (Providing benefit election information to a spouse) is a breachunless the employeehas explicitly authorizedtheir spouse to receive this information.

Comprehensive and Detailed Explanation:Constructive receiptmeans an employee isconsidered paidwhen wages aremade available without restriction, even if they do not physically receive the money.

Option A (On the paycheck date)is incorrect because the date of the paycheck does not determinewhen wages are constructively received.

Option B (When cashed)is incorrect because an employee isconsidered paid before they cash the check.

Option C (When ACH file is created)is incorrect because the wages are not yet available to the employee.

Option D is correct because once wages are accessible (direct deposit or paycheck available for pickup), the IRS considers them "received" for tax purposes.

Comprehensive and Detailed Explanation:To finddiscrepanciesin a general ledger, the following documents should be reviewed:

General Ledger Account Details (A)– To track postings and adjustments.

Bank Account Statements (B)– To ensure transactions reconcile with payroll expenses.

Payroll Register Totals (C)– To comparewages and tax liabilitiesagainst general ledger accounts.

Option D (Copies of Paychecks) is incorrectbecause physical paycheck copiesdo not verify account balances or identify out-of-balance errors.

Comprehensive and Detailed Explanation:Grossing upmeansincreasing the payment amountso that the employeereceives a specific net amountafter taxes are withheld. Employerspay the taxes on behalf of the employeein such cases.

This is commonly used for:

Relocation reimbursements

Bonus payments

Tax equalization for expatriates

Option Ais incorrect because grossing up is done to cover taxes, not to determine withholdings.

Option Bis incorrect becausegrossed-up amounts are taxable, not tax-exempt.

Option Dis incorrect becausegrossed-up payments are always taxable.

Formula:

Comprehensive and Detailed Explanation:Payroll liabilities (taxes, deductions, and withholdings) must be reconciledregularly to prevent errors and ensure compliance.

Best practice is monthly reconciliation (Option B)to ensure:

Payroll taxes matchgeneral ledger accounts.

Deposits are made on time toavoid IRS penalties.

Payroll liability accounts are balanced beforequarterly tax filings.

Option A (Weekly)is impractical unless payroll runs very frequently.

Option C (Quarterly) and Option D (Yearly) are too infrequentand may result in tax errors or compliance issues.

Comprehensive and Detailed Explanation:Payroll professionals must stay updated ontax laws, wage regulations, and compliance requirements. Key resources include:

A (PAYO – Payroll.org)→ Provides training, updates, and compliance resources.

B (DOL – Department of Labor)→ Overseeswage & hour laws (FLSA).

D (IRS – Internal Revenue Service)→ Issues payroll tax regulations.

Option C (FTC – Federal Trade Commission) is incorrectbecause theFTC does not regulate payroll laws. The FTC primarilymonitors consumer protection laws.

Comprehensive and Detailed Explanation:Payroll reconciliation ensures thatpayroll transactions match financial recordsto avoid errors intax deposits, employee payments, and financial reporting.

The correct answer includesall necessary reconciliation points:

Accounts payable payments(ensure wages were paid)

End-of-the-month balances(cross-check payroll liabilities)

General ledger entries(confirm correct postings)

Payroll register(check against wage statements)

Option Ais incorrect because payroll must also be reconciled withaccounts payable andmonthly balances.

Option B & Care incorrect because theyexclude payroll register validation.

Comprehensive and Detailed Explanation:UnderForm I-9 retention rules, an employermust retain the form for the later of:

Three years from the date of hire, or

One year from the termination date.

Employee hired on July 1, 2021→Three years from hire date= July 1, 2024

Employee terminated on September 30, 2022→One year from termination= September 30, 2023

Since thelatest date is September 30, 2024, that is theearliest date the employer may dispose of the Form I-9.

Comprehensive and Detailed Explanation:Acredit balancemeans an accountnormally holds a liability or revenue amount.

Accounts Payable (Option A)representsamounts owedto vendors, which is aliability accountandnormally has a credit balance.

Option B (Cash)is incorrect because cash is anasset accountandtypically has a debit balance.

Option C (Office Equipment)is incorrect because it is afixed assetand alsohas a debit balance.

Option D (Prepaid Expenses)is incorrect because prepaid expenses areassetsthat aredebited when paid.

Comprehensive and Detailed Explanation:Anemployee master filecontainsemployment-related datasuch as:

Shift Premium (A):Used to calculate earnings.

Workweek (B):Defines payroll schedules.

Hire Date (C):Essential fortenure and benefit eligibility.

However,Net Pay (D) is NOT part of employment databecause it is apayroll outcome, not an employment record.

Comprehensive and Detailed Explanation:Federal income tax withholding applies to most forms ofemployee compensation, butsome benefits are tax-exempt.

Option A (401(k) Deferral)is incorrect because pre-tax contributions to atraditional 401(k)arenot subject to federal income tax(but are subject to FICA).

Option C (Military Moving Expenses)is incorrect becausequalified military moving expensesare excluded from taxable income under theTax Cuts and Jobs Act (TCJA).

Option D (HSA Contribution)is incorrect becausepre-tax HSA contributionsmade through payroll deductionare tax-exempt.

Option B (Salary Advance) is correctbecause anyadvance on future wagesis treated astaxable compensation when paid, and income tax must be withheld.

Comprehensive and Detailed Explanation:According toForm I-9, Employment Eligibility Verification, anunexpired U.S. passportis aList A documentthat establishesbothan employee’sidentity and work authorization.

ASocial Security card(Option A) is aList C document, which only provesemployment authorizationbut not identity.

AVoter’s Registration Card(Option C) isnot an acceptable I-9 documentfor identity or work authorization.

ADriver’s License(Option D) is aList B document, which only provesidentitybut not employment eligibility.

Comprehensive and Detailed Explanation:For2024, the401(k) contribution limitis:

$23,000.00 for employees under 50 years old.

$30,500.00 for employees 50 and older(includes$7,500 catch-up contribution).

Since the employee is49 years old, theydo not qualify for the catch-up contribution, so the maximum contribution is$23,000.00.

Comprehensive and Detailed Explanation:Business transactions are classified usingfive main types of accounts:

Asset– Resources owned (e.g., cash, equipment, accounts receivable).

Liability– Amounts owed (e.g., payroll taxes, loans).

Expense– Costs incurred to operate the business (e.g., payroll expenses).

Revenue– Income earned (e.g., sales, service fees).

Equity– Owner’s interest in the business (e.g., retained earnings).

Option A is incorrectbecause "Inventory" is atype of asset, not a separate category.

Option C is incorrectbecause "Cash" is asubcategory of assets, not a primary account type.

Option D is incorrectbecause "Net Income" is the result ofrevenues minus expenses, not a separate account category.

Comprehensive and Detailed Explanation:UnderFair Labor Standards Act (FLSA) rounding rules, employers may round employee timeto the nearest 15-minute incrementusing the7-minute rule:

If an employee clocks inbefore the 7-minute mark, rounddown.

If an employee clocks inafter the 7-minute mark, roundup.

Employee's actual times:

Clock in: 8:07 a.m.→ Roundeddown to 8:00 a.m.

Clock out: 4:08 p.m.→ Roundedup to 4:15 p.m.

Thus, the correct answer isD. 8:00 a.m. to 4:15 p.m..

Comprehensive and Detailed Explanation:Using theIRS Supplemental Wage Method, theflat tax rateof22%applies tobonuses:

Federal Income Tax:

$5,000 × 22% = $1,100.00

Social Security Tax:

$5,000 × 6.2% = $310.00

Medicare Tax:

$5,000 × 1.45% = $72.50

State Income Tax:

$5,000 × 5.0% = $250.00

Total Taxes Withheld:

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Comprehensive and Detailed Explanation:Under theFair Labor Standards Act (FLSA), "white-collar exemptions" apply tocertain salaried employees who meet specific duties and salary tests. The three main categories are:

Executive (Option A)– Managers with supervisory responsibilities.

Administrative (Option B)– Employees in non-manual work related to business operations.

Outside Sales (Option C)– Sales employees working away from the employer’s place of business.

Option D (Computer Hardware Operators) is incorrectbecause this roledoes not qualifyfor exemption under the FLSA white-collar rules. Onlycertain IT professionals (software engineers, systems analysts, etc.)qualify under theComputer Employee Exemption.

Comprehensive and Detailed Explanation:Internal controlsare processes used to ensureaccuracy, security, and compliancein 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 incorrectbecause internal control best practices recommendoff-site or cloud backupsto protect againstdata loss from disasters.

Comprehensive and Detailed Explanation:Payroll security professionals must monitor forpotential payroll fraud or data breaches.

A (Excessive security reset requests)→ Could indicate ahacker attempting unauthorized access.

B (Large payroll data requests)→ Could signalattempted data theft.

D (Activity outside normal hours)→ Could be anexternal breach or insider threat.

Option C (Reprinting a W-2) is NOT necessarily suspicious, as employees frequently request reprints during tax season.