ACCT 160 Chapter 04 Study Guide

________ is the price that a person would pay for an item in an arm's length transaction. A) General valuation B) Manufacturer's Suggested Retail Price C) De Minimis D) Fair Market Value

D) Fair Market Value

According to Consumer Credit Protection Act, what is a limit on the amount of a garnishment for consumer credit? A) It must be less than 50% of an employee's gross earnings. B) It may be 75% of the employee's disposable income. C) It must be a minimum of 10% of an employee's annual salary. D) It cannot exceed 25% of an employee's disposable income.

D) It cannot exceed 25% of an employee's disposable income.

Under the special accounting rule, benefits provided in the last quarter of the year may be reported during the following year. True or False

false

Certain fringe benefits that are not part of a cafeteria plan may be reported on the employee's Form W-2 as income. True or False

true

Charitable contributions are an example of post-tax voluntary deductions. True or False

true

Fringe benefits are monetary or nonmonetary compensation given to employees in return for their service to the company. True or False

true

Premiums for insurance purchased through qualified cafeteria plans may be deducted from an employee's pay on a pre-tax basis. True or False

true

The most common way to determine the value of fringe benefits is the general valuation rule. True or False

true

Specific fringe benefit exclusion rules are found in Publication 15. True or False

false

Frances McNale is an employee who drives a 2020 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.) A) $1,100.84 B) $1,020.44 C) $743.34 D) $964.24

A) $1,100.84

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

A) $15,750.00

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? A) 25% B) 35% C) 50% D) 40%

A) 25%

The maximum percentage of an employee's disposable earnings subject to garnishment in the event of a personal bankruptcy is the lower of _______ of weekly income in excess of federal minimum wage weekly earnings. A) 25% or 30 times B) 20% or 20 times C) 30% or 25 times D) 20% or 25 times

A) 25% or 30 times

What is the difference between a defined benefit and a defined contribution retirement plan? A) Defined contribution plans allow employees to contribute a set amount toward their retirement plan while employed. B) Defined contribution plans allow employees to determine a specific amount of money they wish to receive upon retirement. C) Defined benefit plans limit employee contributions while employed. D) Defined benefit plans allow employees to set aside money on a tax-exempt basis.

A) Defined contribution plans allow employees to contribute a set amount toward their retirement plan while employed.

What is the major limitation of a SIMPLE retirement plan? A) It is limited to firms with 100 or fewer employees. B) Employee contributions to the plan are limited. C) SIMPLE plans are subject to all payroll taxes. D) SIMPLE plan funds must be invested in stock market securities.

A) It is limited to firms with 100 or fewer employees.

What is a limit on garnishments for nontax liens? A) It may not exceed 15% of an employee's disposable income. B) It may be up to 50% of an employee's disposable income. C) An additional 5% may be added for any lien payments in arrears. D) It may not exceed 30 times the federal minimum wage.,

A) It may not exceed 15% of an employee's disposable income.

Lakiesha is an employee who drives a 2020 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.) A) Lease-value, $859.01 B) Cents-per-mile, $859.01 C) Lease value, $2,452.50 D) Cents-per-mile, $2,452.50

A) Lease-value, $859.01

Which of the following may be included as part of an employee's Section 125 "cafeteria" plan? A) Medical expenses B) Tuition expenses C) Meal expenses D) Moving expenses,

A) Medical expenses

Which of the following is true about the employee tax treatment of employer-provided snacks and meals? A) Occasionally provided snacks and meals are not taxable. B) Snacks and meals provided on a regular basis are not taxable. C) Holiday parties and meals provided at special gatherings are always taxable. D) All employer-provided snacks and meals are taxable.

A) Occasionally provided snacks and meals are not taxable.

Under the ________, benefits offered only during the last two months of the calendar year may be treated as paid during the following calendar year. A) Special accounting rule B) IRS Publication 15 C) ERISA D) Benefits valuation rule,

A) Special accounting rule

Luis Billiot is an employee of Plato Designs and drives a 2020 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.) A) $1,252.48 B) $1,092.27 C) $875.14 D) $546.13

B) $1,092.27

Michael McBride is an employee of Reach-it Pharmaceuticals. His company car is a 2020 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.) A) $2,742.77 B) $2,455.27 C) $2,156.87 D) $1,960.27

B) $2,455.27

Single employees with a high-deductible health plan may contribute a maximum of _____ to a health savings account. A) $3,500 B) $3,550 C) $3,600 D) $3,650

B) $3,550

Ross is a full-time employee in Lansing, Michigan, 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. Michigan has a 4.25% flat tax.) A) $365.28 B) $760.31 C) $584.45 D) $876.68,

B) $760.31

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. A) 10 B) 50 C) 100 D) 150

B) 50

________ benefits are fringe benefits with minimalmonetary value. A) Minimal B) De minimis C) De normal D) Mandatory

B) De minimis

Which of the following must accompany a Health Savings Account (HSA) to be considered part of a cafeteria plan? A) Long-term care insurance B) High-deductible health plan C) Low-deductible health plan D) Flexible Savings Agreement

B) High-deductible health plan

By what date must the value of all noncash benefits be determined for the preceding year? A) December 31 B) January 31 C) February 28 D) March 31

B) January 31

What is the purpose of pre-tax deductions? A) To reduce the amount of tax revenue available B) To reduce the financial burden on families C) To reduce the financial burden on employers D) To support proactive health care

B) To reduce the financial burden on families

As a general rule, when should the employer deposit money associated with employee benefits? A) When the employee demands the benefit. B) When the benefit is made available. C) Immediately upon receipt. D) When other tax deposits are made.

B) When the benefit is made available.

Under what condition is the fringe benefit of a gym membership taxable? A) When the employer has on-site facilities that are restricted to employee use. B) When the employer offers membership to an off-site club at no additional cost to the employee. C) When the employer has on-site facilities that are open to public use. D) Gym memberships are always taxable.

B) When the employer offers membership to an off-site club at no additional cost to the employee.

The ________ determines when benefit amounts should be withheld from employee pay. A) employee B) employer C) IRS D) State in which the business is conducted

B) employer

The purpose of fringe benefits is to ________. A) reduce taxable compensation B) entice employee engagement C) avoid cash outlays for employee benefits D) defer tax obligations

B) entice employee engagement

The cash value of ________ must be included as compensation on the employee's W-2. A) occasional meals and snacks B) gift cards C) on-site athletic facilities D) plaques and trophies

B) gift cards

According to Publication 15-b, what is the annual cash value limit for excluded qualified achievement awards? A) $800 B) $1,400 C) $1,600 D) $2,000,

C) $1,600

The IRS permits employees to rollover up to ________ annually in their FSA at the employer's discretion. A) $100 B) $250 C) $500 D) $750

C) $500

Publication ________ is the employer's guide to fringe benefits. A) 15-t B) 15-f C) 15-b D) 15-k

C) 15-b

Luis Billiot is an employee of Plato Designs and drives a 2020 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.) A) 82.19% B) 14.50% C) 19.40% D) 17.64%

C) 19.40%

Frances McNale is an employee who drives a 2020 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.) A) 35.63% B) 39.82% C) 41.10% D) 42.39%

C) 41.10%

In which type of retirement plan does the company offer employees the ability to earn company stock for the duration of their employment? A) SEP B) SIMPLE C) ESOP D) 401(k)

C) ESOP

Employers benefit by offering POPs because they reduce ________. A) income tax liability B) cash paid to employees C) FICA tax liability D) employee turnover

C) FICA tax liability

The Families First Coronavirus Response Act made fringe benefits available as an extension of _________. A) FLSA B) FICA C) FMLA D) ERISA

C) FMLA

What differentiates Flexible Spending Accounts (FSAs) and Health Savings Accounts (HSAs)? A) Amounts contributed to Flexible Spending Accounts (FSAs) may not be rolled over from one year to the next. B) Health Savings Accounts (HSAs) expire on an annual basis but Flexible Spending Accounts (FSAs) continue perpetually. C) Flexible Spending Accounts (FSAs) expire annually but Health Savings Accounts (HSAs) may be reserved for use late in life. D) Only Health Savings Accounts (HSAs) may be deducted from employee on a pre-tax basis.

C) Flexible Spending Accounts (FSAs) expire annually but Health Savings Accounts (HSAs) may be reserved for use late in life.

Ronald Ferrer is an employee who drives a 2020 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.) A) Lease-value, $1,362.50 B) Cents-per-mile, $1,362.50 C) Lease-value, $600.19 D) Cents-per-mile, $600.19

C) Lease-value, $600.19

The primary difference between pre-tax and post-tax deductions is: A) Post-tax deductions reduce tax obligations. B) Pre-tax deductions include child support. C) Pre-tax deductions reduce tax liability. D) Post-tax deductions reduce gross pay.

C) Pre-tax deductions reduce tax liability.

39) Retirement fund contributions are generally subject to ________ and ________ taxes. A) Federal withholding & State withholding B) Federal withholding & Social Security C) Social Security & Medicare D) Federal withholding & Medicare

C) Social Security & Medicare

Post-Tax Deductions are amounts ________. A) that are voluntarily chosen by the employee B) that the employer chooses to withhold after assessing the employee's tax liability C) includes both mandatory and voluntary deductions D) are only mandatory deductions like garnishments and union dues

C) includes both mandatory and voluntary deductions

Contributions to FSAs in excess of what annual amount are treated as taxable income? A) $2,450 B) $2,550 C) $2,650 D) $2,750

D) $2,750

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

D) $5,280.00

The maximum percentage of an employee's disposable income subject to a Consumer Credit garnishment is ____ of weekly income in excess of federal minimum wage weekly earnings. A) 10% B) 15% C) 20% D) 25%

D) 25%

According to Bureau of Labor Statistics, what percentage of additional compensation is commonly offered as fringe benefits? A) 10-18% B) 15-23% C) 21-29% D) 25-33%

D) 25-33%

Which of the following is true about 401(k) retirement plans? A) All 401(k) plans are cafeteria plans. B) 401(k) plans are exempt from all payroll taxes. C) 401(k) plans always reduce income tax liability. D) 401(k) plans are usually subject to FICA taxes.

D) 401(k) plans are usually subject to FICA taxes.

What differentiates 401(k) and a 403(b) retirement plans? A) 401(k) plans are limited to companies with more than 100 employees. B) 403(b) plans are subject to all payroll taxes. C) 401(k) plans may not be invested in stock-market funds. D) 403(b) plans are offered by non-profit employers.

D) 403(b) plans are offered by non-profit employers.

Over ________ of U.S. employees report that fringe benefits affect their choice of employers. A) 10% B) 25% C) 40% D) 50%

D) 50%

The Families First Coronavirus Response Act mandated employer responsibility for mandated additional fringe benefits until_________. A) May 1, 2020 B) July 31, 2020 C) September 30, 2020 D) December 31, 2020,

D) December 31, 2020

What is true about long-term disability insurance? A) It is always included in taxable income. B) It is subject to Social Security taxes. C) It is subject to Medicare taxes. D) It may be deducted on either a pre-or post-tax basis.

D) It may be deducted on either a pre-or post-tax basis.

Employer contributions to employee health insurance must be: A) Added to Federal taxable wages. B) Reported in Social Security wages. C) Reported in State taxable wages. D) Reported in Box 12, using Code DD.

D) Reported in Box 12, using Code DD.

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? A) IRA B) SIMPLE C) ESOP D) SEP

D) SEP

If a fringe benefit involves a deduction from employee pay, which of the following is true? A) Employers may only offer the benefit to certain classes of employees. B) The employee must enroll in direct deposit for their pay. C) The fringe benefit must be subject to income tax. D) The amount of the deduction must be listed on the employee's pay advice.

D) The amount of the deduction must be listed on the employee's pay advice.

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

D) The commuter rule forbids personal use of the company vehicle.

If an employer paid for its employees' long-term care insurance premiums, who determines the effect on the employees' gross pay? A) The IRS B) The state in which the business is located C) The employee D) The employer

D) The employer

Under the unsafe conditions rule: A) an employee may use a company vehicle for a one-way commute. B) employees may only use company cars if their normal travel mode is unsafe. C) employees may leave work at any time. D) employees are charged $1.50 for the one-way commute.

D) employees are charged $1.50 for the one-way commute.

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

false

Fringe benefits and employee satisfaction have no correlation. True or False

false

Fringe benefits are always part of an employee's cash compensation package. True or False

false