Chap 4 Exercises Set A Flashcards
Caroline Watts is an employee of Lavender Creek Farm. She has come to you, the payroll accountant, for advice about her health insurance premiums, specifically, whether she should have them deducted pre-tax or post-tax.
What reason(s) would you give her for having the medical premiums deducted on a pre-tax basis?
Which apply?
- The premium amounts are reduced by deducting them on a pre-tax basis.
- The employee’s income that is subject to income tax(es) is reduced.
- The income subject to Social Security and Medicare taxes is reduced.
- All health insurance premiums must be deducted on a pre-tax basis.
- The employee’s income that is subject to income tax(es) is reduced.
- The income subject to Social Security and Medicare taxes is reduced.
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Nora Wade is an employee of WGLO-TV, where she is an on-air news presenter.
Which of the following would likely be fringe benefits that her employer would provide because they would be needed as part of her job?
Check all that apply:
- Personal accounting services
- On-site cafeteria
- Hair and makeup services
- Wardrobe consulting services
- Hair and makeup services
- Wardrobe consulting services
Examples of qualified insurance benefits include which of the following?
Check all that apply:
- Group term life insurance (up to $50,000)
- Long–term care benefits
- Pet insurance premiums
- Health savings accounts
- Group term life insurance (up to $50,000)
- Long–term care benefits
- Health savings accounts
What is a significant difference between flexible spending arrangements (FSAs) and health savings accounts (HSAs)?
Multiple Choice
- Only FSAs may be included as part of a cafeteria plan.
- No annual pre-tax contribution limit exists for FSAs.
- HSAs may accompany any type of employer-sponsored health insurance.
- Amounts contributed to HSAs may remain in the account for use later in life.
Amounts contributed to HSAs may remain in the account for use later in life.
Dallas Wong is an employee who receives educational assistance in the amount of $10,250 per year.
How is this amount treated for tax purposes?
Multiple Choice
- None of it is taxable.
- All of it is taxable.
- $5,000 is taxable.
- $5,250 is taxable.
$5,000 is taxable.
$10,250 − $5,250 allowable = $5,000 taxable benefit.
Ana Cole is an employee of Wilson In-Home Healthcare Services. She is issued a company vehicle so that she may drive to customer sites.
Which of the general valuation rules would be appropriate to compute the value of the asset for any personal use?
Check all that apply:
- Cents-per-mile rule
- Commuting rule
- Lease value rule
- Unsafe conditions rule
- Cents-per-mile rule
- Commuting rule
- ## Lease value rule
Which of the following describes the primary difference between a 401(k) and a 403(b) retirement plan?
Multiple Choice
- The 401(k) is restricted to investments in stocks only.
- The 401(k) is a defined benefit only plan.
- The 403(b) is restricted to use by nonprofit companies.
- The 403(b) is a defined contribution only plan.
The 403(b) is restricted to use by nonprofit companies.
Which of the following is true about fringe benefits?
Check all that apply:
- They represent additional cash paid directly to employees.
- The amount of the fringe benefit is never subject to income tax.
- They represent additional compensation given for services performed.
- They are only available for employees.
- They represent additional compensation given for services performed.
- They are only available for employees.
How is disposable income computed?
Multiple Choice
- Gross pay less pre-tax deductions
- Gross pay less Social Security and Medicare taxes
- Gross pay less mandatory deductions
- Gross pay less pre-tax deductions and income taxes
Gross pay less mandatory deductions
By what date must a company declare the value of noncash benefits used in 2020?
Multiple Choice
- December 31, 2021
- February 1, 2021
- January 1, 2021
- January 31, 2021
January 31, 2021
