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Exam 12: Compensation

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Question 41

True/False

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A cafeteria plan provides employees discounted meals at a company-sponsored dining room.

A) True
B) False

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Question 42

Multiple Choice

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Grace's employer is now offering group-term life insurance.The company will provide each employee with $200,000 of group-term life insurance.It costs Grace's employer $700 to provide this amount of insurance to Grace each year.Assuming that Grace is 43 years old,use the table to determine the monthly premium that Grace must include in income as a result of receiving the group-term life benefit. Uniform Premiums for $1,000 of Group-Term Life Insurance Protection

A) $0.
B) $15.00.
C) $22.00.
D) $58.33.

E) A) and B)
F) B) and D)

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Question 43

Multiple Choice

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Rachel receives employer-provided health insurance.The employer's cost of the health insurance is $6,000 annually.What is her employer's after-tax cost of providing the health insurance,assuming that the employer's marginal tax rate is 21 percent and the employer is profitable?

Which of the following isn't reported on the Form W-2?

Employers computing taxable income receive a deduction for reasonable salary and wages paid to employees.

Suzanne received 20 ISOs (each option gives her the right to purchase 20 shares of stock for $12 per share)at the time she started working,when the stock price was $13 per share.Three years later,when the share price was $23 per share,she exercised all of her options.If Suzanne holds the shares for two additional years and sells them when the market price is $30,how much gain will Suzanne recognize on the sale and how much tax will she pay,assuming her marginal tax rate is 37 percent?

Maren received 10 NQOs (each option gives her the right to purchase 10 shares of stock for $8 per share) at the time she started working when the stock price was $6 per share.When the share price was $15 per share,she exercised all of her options.Eighteen months later she sold all of the shares for $20 per share.How much gain will Maren recognize on the sale of the shares and how much tax will she pay assuming her marginal tax rate is 37 percent?

An employee can indicate whether they want an additional amount withheld for payroll taxes on the Form W-4.

Health insurance is an example of a nontaxable fringe benefit.

Which of the following is a fringe benefit that allows employers to discriminate among employees when providing it?

Employees complete a Form W-2 to specify their income tax withholding.

Up to $5,250 of educational benefits can be excluded from an employee's compensation.

Employees will always prefer to receive incentive stock options over nonqualified stock options.

Suzanne received 20 ISOs (each option gives her the right to purchase 20 shares of stock for $12 per share)at the time she started working,when the stock price was $13 per share.Three years later,when the share price was $23 per share,she exercised all of her options.If Suzanne holds the shares for 10 additional months and sells them when the market price is $30,how much gain will Suzanne recognize on the sale and how much tax will she pay,assuming her marginal tax rate is 35 percent?

Which of the following forms is used to determine income tax withholding for an employment relationship?

Stock options will always provide employees with future compensation.

Annika's employer provides its employees with parking benefits.The fair market value of the annual parking benefit is $4,800 ($400 per month).What is the amount Annika must include into income with respect to her parking benefit in 2019?

The date on which stock options are given to the employee is called the exercise date.

Aharon exercises 10 stock options awarded several years ago.The following information pertains to the options: (1) each option gives the employee the right to buy 10 shares,(2) the market price on the grant date was $7,(3) the strike price is $10,and (4) the market price on the exercise date was $15.How much will it cost Aharon to purchase the options on the exercise date?

Which of the following statements regarding compensation is false?