PAYROLL FUNDAMENTALS 1 MIDTERM EXAM 2026
SOLVED QUESTIONS & ANSWERS
SECTION DISTRIBUTION (APA Fundamentals of Payroll FPC Blueprint)
Section # Questions
Payroll Law & Compliance (FLSA, FMLA, 12
DOL, state laws)
Worker Classification (Employee vs. 6
Independent Contractor)
Federal Income Tax Withholding (Form 12
W-4, withholding tables, supplemental
wages)
FICA (Social Security & Medicare) 10
FUTA (Federal Unemployment Tax Act) 4
Non-Taxable Fringe Benefits & Imputed 6
Income
Payroll Accounting (journal entries, 8
accruals, liabilities)
Payroll Recordkeeping & Reporting 10
(Form 941, W-2, W-3, 1099-NEC)
TOTAL 75
SECTION 1: PAYROLL LAW & COMPLIANCE (FLSA, FMLA, DOL, STATE LAWS) —
12 Questions
Q1: Under the FLSA, which of the following is the standard overtime pay requirement
for nonexempt employees working more than 40 hours in a workweek?
• A. 1.5 times the regular rate of pay
• B. Double the regular rate of pay
• C. 1.5 times the federal minimum wage
• D. No overtime required if employee agrees in writing
Correct Answer: A
Rationale: Correct because FLSA Section 7 requires overtime at not less than 1.5 times
the employee's regular rate for all hours worked over 40 in a workweek.
Q2: Under the FLSA, which of the following factors is NOT part of the "duties test" for
the executive exemption?
• A. Primary duty is management of the enterprise or a recognized department
• B. Customarily and regularly directs the work of two or more full-time employees
• C. Has the authority to hire or fire other employees
,• D. Employee has a high school diploma or equivalent
Correct Answer: D
Rationale: Correct because educational level is not a factor in any FLSA exemption
duties test; exemptions are based on salary and actual job duties, not education.
Q3: Under FMLA, which of the following is NOT a qualifying reason for up to 12 weeks
of unpaid, job-protected leave?
• A. Birth of a child and bonding within 12 months
• B. Serious health condition of the employee
• C. Serious health condition of the employee's sibling
• D. Qualifying exigency due to military deployment of employee's spouse
Correct Answer: C
Rationale: Correct because FMLA covers serious health condition of spouse, child, or
parent, but not siblings; siblings are not included as family members under FMLA.
Q4: To be eligible for FMLA leave, an employee must have worked for the employer
for at least how many months and how many hours during the preceding 12-month
period?
• A. 6 months and 625 hours
• B. 12 months and 1,250 hours
• C. 12 months and 1,000 hours
• D. 24 months and 1,250 hours
Correct Answer: B
Rationale: Correct because FMLA eligibility requires 12 months of employment, 1,250
hours of service during the 12 months prior to leave, and work at a location with 50 or
more employees within 75 miles.
Q5: Under the FLSA child labor provisions, which of the following occupations is
generally prohibited for minors under 18 years of age?
• A. Office clerical work
• B. Operating a meat slicer in a grocery store
• C. Cashier work in a retail store
• D. Lifeguarding at a swimming pool
Correct Answer: B
, Rationale: Correct because operating power-driven meat processing machines is a
hazardous occupation prohibited for minors under 18 under FLSA child labor
regulations; other listed occupations are generally permitted.
Q6: The FLSA "enterprise coverage" test applies to businesses with annual gross sales
of at least:
• A. $100,000
• B. $250,000
• C. $500,000
• D. $1,000,000
Correct Answer: C
Rationale: Correct because FLSA enterprise coverage applies to businesses with annual
gross volume of sales made or business done of at least $500,000; individual coverage
applies regardless of enterprise size.
Q7: Under the FLSA, which of the following is generally considered compensable
time?
• A. Commuting from home to the regular workplace
• B. Waiting time when the employee is completely relieved of duties
• C. On-call time when the employee must remain on the employer's premises
• D. Meal periods of 30 minutes or more when completely relieved of duties
Correct Answer: C
Rationale: Correct because on-call time where the employee must remain on the
employer's premises or so close that they cannot use the time effectively for their own
purposes is compensable under FLSA hours worked rules.
Q8: An employer is required to retain payroll records under the FLSA for at least how
many years?
• A. 2 years
• B. 3 years
• C. 4 years
• D. 7 years
Correct Answer: B
Rationale: Correct because FLSA requires employers to preserve payroll records,
collective bargaining agreements, and sales and purchase records for at least three
years; supplementary records must be kept for two years.
SOLVED QUESTIONS & ANSWERS
SECTION DISTRIBUTION (APA Fundamentals of Payroll FPC Blueprint)
Section # Questions
Payroll Law & Compliance (FLSA, FMLA, 12
DOL, state laws)
Worker Classification (Employee vs. 6
Independent Contractor)
Federal Income Tax Withholding (Form 12
W-4, withholding tables, supplemental
wages)
FICA (Social Security & Medicare) 10
FUTA (Federal Unemployment Tax Act) 4
Non-Taxable Fringe Benefits & Imputed 6
Income
Payroll Accounting (journal entries, 8
accruals, liabilities)
Payroll Recordkeeping & Reporting 10
(Form 941, W-2, W-3, 1099-NEC)
TOTAL 75
SECTION 1: PAYROLL LAW & COMPLIANCE (FLSA, FMLA, DOL, STATE LAWS) —
12 Questions
Q1: Under the FLSA, which of the following is the standard overtime pay requirement
for nonexempt employees working more than 40 hours in a workweek?
• A. 1.5 times the regular rate of pay
• B. Double the regular rate of pay
• C. 1.5 times the federal minimum wage
• D. No overtime required if employee agrees in writing
Correct Answer: A
Rationale: Correct because FLSA Section 7 requires overtime at not less than 1.5 times
the employee's regular rate for all hours worked over 40 in a workweek.
Q2: Under the FLSA, which of the following factors is NOT part of the "duties test" for
the executive exemption?
• A. Primary duty is management of the enterprise or a recognized department
• B. Customarily and regularly directs the work of two or more full-time employees
• C. Has the authority to hire or fire other employees
,• D. Employee has a high school diploma or equivalent
Correct Answer: D
Rationale: Correct because educational level is not a factor in any FLSA exemption
duties test; exemptions are based on salary and actual job duties, not education.
Q3: Under FMLA, which of the following is NOT a qualifying reason for up to 12 weeks
of unpaid, job-protected leave?
• A. Birth of a child and bonding within 12 months
• B. Serious health condition of the employee
• C. Serious health condition of the employee's sibling
• D. Qualifying exigency due to military deployment of employee's spouse
Correct Answer: C
Rationale: Correct because FMLA covers serious health condition of spouse, child, or
parent, but not siblings; siblings are not included as family members under FMLA.
Q4: To be eligible for FMLA leave, an employee must have worked for the employer
for at least how many months and how many hours during the preceding 12-month
period?
• A. 6 months and 625 hours
• B. 12 months and 1,250 hours
• C. 12 months and 1,000 hours
• D. 24 months and 1,250 hours
Correct Answer: B
Rationale: Correct because FMLA eligibility requires 12 months of employment, 1,250
hours of service during the 12 months prior to leave, and work at a location with 50 or
more employees within 75 miles.
Q5: Under the FLSA child labor provisions, which of the following occupations is
generally prohibited for minors under 18 years of age?
• A. Office clerical work
• B. Operating a meat slicer in a grocery store
• C. Cashier work in a retail store
• D. Lifeguarding at a swimming pool
Correct Answer: B
, Rationale: Correct because operating power-driven meat processing machines is a
hazardous occupation prohibited for minors under 18 under FLSA child labor
regulations; other listed occupations are generally permitted.
Q6: The FLSA "enterprise coverage" test applies to businesses with annual gross sales
of at least:
• A. $100,000
• B. $250,000
• C. $500,000
• D. $1,000,000
Correct Answer: C
Rationale: Correct because FLSA enterprise coverage applies to businesses with annual
gross volume of sales made or business done of at least $500,000; individual coverage
applies regardless of enterprise size.
Q7: Under the FLSA, which of the following is generally considered compensable
time?
• A. Commuting from home to the regular workplace
• B. Waiting time when the employee is completely relieved of duties
• C. On-call time when the employee must remain on the employer's premises
• D. Meal periods of 30 minutes or more when completely relieved of duties
Correct Answer: C
Rationale: Correct because on-call time where the employee must remain on the
employer's premises or so close that they cannot use the time effectively for their own
purposes is compensable under FLSA hours worked rules.
Q8: An employer is required to retain payroll records under the FLSA for at least how
many years?
• A. 2 years
• B. 3 years
• C. 4 years
• D. 7 years
Correct Answer: B
Rationale: Correct because FLSA requires employers to preserve payroll records,
collective bargaining agreements, and sales and purchase records for at least three
years; supplementary records must be kept for two years.
