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Exam 12: Compensation

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Question 41

Multiple Choice

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Bad Brad received 20 NQOs (each option gives him the right to purchase 30 shares of stock for $12 per share) from his employer. At the time he started working, the stock price was $11 per share. Now that the share price is $25 per share, he exercises all of the options. Two years later Bad Brad sells the stock for $27 per share. What is Bad Brad's basis in his stock for purposes of calculating the gain or loss at the time of the sale?

A) $16,200.
B) $15,000.
C) $7,200.
D) $7,800.

E) A) and B)
F) None of the above

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Question 42

Multiple Choice

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Which of the items is not correct regarding withholding?

A) Married employees can choose to have income tax withholding on wages withheld at the higher single rates.
B) Employees can claim exempt status and avoid withholding.
C) Employees that also have self-employment income can have additional amounts of federal tax withheld to avoid estimated tax payments.
D) Employees cannot claim an allowance for a child unless they are entitled to claim the child as a dependent.

E) A) and C)
F) C) and D)

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Question 43

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Frederique works for a furniture retailer. The shop allows all employees to purchase 10 pieces of furniture per year at a discount. This year Frederique purchased eight pieces. She gave three pieces as a gift to her brother as a wedding present. Her employer's average gross profit percentage is 25 percent. Each piece was 20 percent off of normal retail prices and in all cases the employee price exceeded the employer's cost. What amount of the discount must be included in Frederique'sincome?

For 2017, up to $300 of qualified transportation fringe benefits can be excluded from income.

Hotel employees can receive free nights lodging on a space available basis without incurring compensation.

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

The use of restricted stock is increasing relative to the use of stock options.

Which of the following is false regarding dependent care expenses?

On Form W-4, an employee can only claim one allowance for each personal ordependency exemption that will be claimed on the employee's income tax return.

Which of the following statements regarding compensation is false?

Which of the following pairs of items is not needed to calculate the after-tax proceeds for a same-day sale?

Which of the following does not qualify as a "for the convenience of the employer" nontaxable fringe benefit?

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

Up to $10,000 of dependent care expenses can be excluded from an employee's compensation.

Jane is an employee of Rohrs Golf Emporium. The shop allows employees to purchase equipment at significant discount. This year Jane purchased several new items to improve her game. If the employer's average gross profit percentage is 30 percent, what amount must Jane include in income?

One purpose of Form W-4 is to determine an employee's withholding.

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

An employer always receives a deduction for total compensation paid to a CEO.

Which of the following refers to the date stock options are awarded to an employee?

Hope's employer is now offering group-term life insurance. The company will provide eachemployee with $200,000 of group-term life insurance. It costs Hope's employer $700 to provide this amount of insurance to Hope each year. Assuming that Hope is 27 years old, use the table todetermine the monthly premium that Hope must include in income as a result of receiving thegroup-term life benefit?EXHIBIT 12-10 Uniform Premiums for $1,000 of Group-Term Life Insurance Protection