Tonya's Employer Pays the Full Premium on a Disability Income

question 2084

Multiple Choice

Tonya's employer pays the full premium on a disability income policy from an insurance company on behalf of all employees. After a skiing accident, Tonya was out of work for three months and collected $2,000 per month ($6,000 total) of disability benefits from this policy. In addition, Tonya received another $1,000 per month ($3,000 total) from a disability policy she had purchased herself. Tonya had paid a total of $1,300 in premiums on her policy. How much of the $9,000 total received is taxable?

• A) $6,000
• B) $7,700
• C) $9,000
• D) $3,000

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Definitions:

Option to Abandon

A strategic decision-making right allowing a company to cease investment in a project if operational costs outweigh the benefits.

Forecasting Error

The difference between the actual value and the predicted value in forecasting, indicating the accuracy of the prediction.

Capital Expenditure

Resources allocated by a corporation to purchase or improve tangible assets like land, factories, or machinery.

Variable Costs

Costs that vary directly with the level of production or sales volume, such as raw materials and direct labor costs.