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Exam 12: Compensation

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Question 51

True/False

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

A) True
B) False

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Question 52

Multiple Choice

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

A) The employee's taxable salary and wages.
B) Annual Federal and state withholding information.
C) Indication as to whether an employee had more than one employer during the year.
D) Annual amount of Social Security and Medicare tax withholding information.

E) A) and B)
F) A) and C)

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Question 53

True/False

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Cornhusker Bank reimburses employees for dues to the local bankers association. The reimbursement is includible in the employee's income.

Brandy graduated from Vanderbilt with her bachelor's degree recently. She works for Walton & Company CPAs. The firm pays her tuition ($8,000 per year) for her so that she can receive her MBA. How much of the $8,000 tuition benefit does Brandy need to include in her income?

Taxable fringe benefits include automobile allowances, gym memberships, and personal use tickets to the theatre or sporting events.

Which of the following statements regarding compensation is false?

Which of the following is false regarding dependent care expenses?

Kevin is the financial manager of Levingston BMW. The shop allows employees to purchase up to two vehicles at a discount. Levingston's average gross profit percentage is 15%. This year Kevin purchased a 530 model and a new M3. What amount must Kevin include in income?

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. What is the amount of Maren's bargain element?

Annika's employer provides each employee with up to $200 of monthly vouchers for public transportation. What is the amount that Annika must include into income with respect to her benefit in 2016?

Which of the following is false regarding a section 83(b) election?

Flexible spending accounts allow employees to set aside before-tax dollars for medical and dependent care expenses.

When a publicly traded CEO's salary exceeds $1,000,000, the employee _____ taxed on the entire amount, and the employer ______ allowed a deduction on the entire amount.

Lina, a single taxpayer with a 35 percent marginal tax rate, desires health insurance. The health insurance would cost Lina $8,000 to purchase if she pays for it herself (Lina's AGI is too high to receive any tax deduction for the insurance as a medical expense). Lina's employer has a 30 percent marginal tax rate. What is the maximum amount of before-tax salary Lina would give up to receive health insurance? (Round your answer to the nearest whole number)

Tom recently received 2,000 shares of restricted stock from his employer, Independence Corporation, when the share price was $10 per share. Tom's restricted shares vested three years later when the market price was $14. Tom held the shares for a little more than a year and sold them when the market price was $12. What is the amount of Tom's income or loss on the sale?

Which of the following statements is true regarding the $1,000,000 limit on covered employees for publicly traded companies?

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

Which of the following is true regarding stock options?

Employees may exclude from income items such as occasional theatre tickets, t-shirts, or a Thanksgiving turkey.

The date on which stock options are no longer subject to forfeiture is called the vesting date.