ch12 True False True False True False True False Student 1 Current compensation is usually comprised of salary wages and bonuses 2 Employees complete a Form W 2 to specify their income tax withholding 3 Employers computing taxable income receive a deduction for salary and wages paid to employees 4 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 2 months after the employer s year end True False 5 One purpose of Form W 4 is to determine an employee s withholding 6 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 True False 7 When an employee has more than one employer during the year and the combined compensation exceeds the Social Security wage base the excess Social Security is treated as an additional income tax payment True False 8 Employers receive a deduction for compensation paid to and employment taxes paid on behalf of employees True False True False True False True False True False True False True False True False True False 9 An employer always receives a deduction for total compensation paid to a CEO 10 One primary purpose of equity compensation is to motivate employees 11 The date on which stock options are given to the employee is called the exercise date 12 Stock options will always provide employees with future compensation 13 The date on which stock options are no longer subject to forfeiture is called the vesting date 14 When stock options are exercised they are converted into actual employer stock 15 Employees will always prefer to receive incentive stock options over nonqualified options 16 Employers always prefer to award incentive stock options rather than nonqualified options True False True False True False True False vesting True False True False True False they provide True False True False True False True False True False compensation True False True False 17 Employer s expense for stock options is typically recognized earlier for book than tax purposes 18 The use of restricted stock is rising relative to the use of stock options 19 The employee s income for restricted stock is typically measured on the grant date 20 An employee s income with respect to restricted stock is the fair market value on the vesting date 21 A section 83 b election freezes the value of restricted stock for compensation purposes at the date of the 22 Fringe benefits are generally a form of non cash compensation 23 Taxable fringe benefits include automobile allowances gym memberships and personal use tickets to the theater or sporting events True False 24 Group term life insurance is a fringe benefit that can be partially taxable and partially tax free 25 Employers sometimes pay a gross up to employees to cover taxes associated with taxable fringe benefits 26 Employers cannot discriminate between highly and non highly compensated employees when providing taxable fringe benefits True False 27 Health insurance is an example of a nontaxable fringe benefit 28 An apartment manager can exclude the fair market value of free rent from his or her income 29 Up to 5 250 of educational benefits can be excluded from an employee s compensation 30 Up to 10 000 of dependent care expenses can be excluded from an employee s compensation 31 Hotel employees can receive free nights lodging on a space available basis without incurring 32 Qualified employee discounts allow employees to purchase employer goods at a discount 33 Cornhusker Bank reimburses employees for dues to the local bankers association The reimbursement is includible in the employee s income True False 34 Employees may exclude from income items such as occasional theater tickets t shirts or a Thanksgiving turkey True False 35 For 2011 up to 250 of qualified transportation fringe benefits can be excluded from income 36 A cafeteria plan provides employees discounted meals at a company sponsored dining room 37 Flexible spending accounts allow employees to set aside before tax dollars for medical and dependent True False True False care expenses True False 38 Which of the following forms is filled out by an employee who is a citizen at the beginning of an employment relationship A Form I 9 B Form W 2 C Form W 4 D Form 1099 39 Which of the following items is not included on an employee s Form W 2 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 40 Which of the following statements regarding compensation is false 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 2 months of year end are included in employee s compensation in the year they were earned 41 Which of the following statements regarding income tax withholding is incorrect A The withholding tables are designed so that employee withholding approximates the tax liability B Large itemized deductions require the need for additional withholding C The withholding tables vary based on filing status D Extra allowances can be claimed and reduce withholding 42 Which of the following isn t done by Form W 2 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 43 Which of the items is not correct regarding withholding Employees that also have self employment income can have additional amounts withheld to avoid estimated tax payments Employees cannot claim an allowance for a child unless they are entitled to claim the child as a dependent A B C Employees can claim exempt and avoid withholding D Married employees can choose to be withheld at the higher single rates 44 Which of the following regarding the Form W 4 is incorrect 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 45 Which of the following statements is true regarding excess Social Security contributions by an employer A Excess contributions are