Which of the Following Statements Is/are Correct? Danny Falls Off

question 68

Multiple Choice

Which of the following statements is/are correct? Danny falls off a ladder at work and is hospitalized for two weeks. He receives $650 from I. II. the state worker's compensation fund, his regular $1,800 salary, and $925 disability pay from his employer's health and accident insurance plan. Danny must recognize $2,725 of income from the payments. Donna's grandfather dies and leaves her City of Goldsboro bonds that are worth $57,000. The bonds have a face value of $50,000 and pay 5% annual interest. Donna must include the $2,500 of interest she receives in her gross income.

• A) Only statement I is correct.
• B) Only statement II is correct.
• C) Both statements are correct.
• D) Neither statement is correct.

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Definitions:

Federal Income Tax

A tax levied by the federal government on the annual earnings of individuals, corporations, trusts, and other legal entities.

Social Security Tax

A tax levied on both employers and employees to fund the Social Security program, which provides retirement, disability, and survivorship benefits.

Gross Salary

The total amount of an employee's earnings before any deductions are made, such as taxes and social security contributions.

Insurance

A financial product that provides protection against financial loss, offering compensation in the case of specific events such as accident, illness, or damage to property.