CPP CPP Payroll Systems & Processes 1 — Questions and Answers
Question 1: What is the correct order for computing an employee's net pay?
- Net pay → Gross pay → Deductions
- Gross pay → Pre-tax deductions → Tax withholding → Post-tax deductions → Net pay (Correct answer)
- Tax withholding → Gross pay → Deductions → Net pay
- Post-tax deductions → Pre-tax deductions → Gross pay → Net pay
Correct answer: Gross pay → Pre-tax deductions → Tax withholding → Post-tax deductions → Net pay
Net pay is derived by starting with gross pay, subtracting pre-tax deductions, then taxes, then any post-tax deductions.
Question 2: The optional flat supplemental withholding rate may be applied when:
- The employee claims exempt on Form W-4
- The employee resides in a state with no income tax
- Supplemental wages are paid separately from regular wages on a separate check (Correct answer)
- The employee has more than five years of service
Correct answer: Supplemental wages are paid separately from regular wages on a separate check
When supplemental wages are paid on a separate check apart from regular wages, employers may apply the flat 22% federal supplemental withholding rate.
Question 3: A semi-monthly payroll schedule results in how many pay periods per year?
- 12
- 52
- 24 (Correct answer)
- 26
Correct answer: 24
Semi-monthly means twice per month, so 2 × 12 months = 24 pay periods per year.
Question 4: Imputed income is best described as:
- Wages paid to an employee in advance of work performed
- The taxable value of employer-provided non-cash benefits that must be included in gross wages (Correct answer)
- Overtime compensation paid at a premium rate above the regular rate
- Employee salary deferrals into a qualified retirement plan
Correct answer: The taxable value of employer-provided non-cash benefits that must be included in gross wages
Imputed income is the fair market value of non-cash benefits that exceeds IRS exclusion limits and must be added to taxable wages.
Question 5: The FLSA requires overtime to be paid at what minimum rate for hours over 40 in a workweek?
- 1.25 times the regular rate of pay
- 2 times the regular rate of pay
- 1.5 times the regular rate of pay (Correct answer)
- The same regular rate of pay
Correct answer: 1.5 times the regular rate of pay
The FLSA requires overtime pay of at least 1.5 times the employee's regular rate of pay for all hours worked over 40 in a workweek.
Question 6: For a non-exempt employee earning both hourly wages and a non-discretionary bonus, overtime is correctly calculated by:
- Applying 0.5× only to hours attributable to the bonus
- Using 1.5× the hourly rate and ignoring the bonus amount entirely
- Including the bonus in the regular rate calculation before computing the overtime premium (Correct answer)
- Paying the bonus in a later pay period to avoid overtime recalculation
Correct answer: Including the bonus in the regular rate calculation before computing the overtime premium
Non-discretionary bonuses must be included when computing the regular rate of pay, which then determines the correct overtime premium owed.
CPP CPP Payroll Systems & Processes 1
What is the correct order for computing an employee's net pay?