Heather Is a Full-Time Employee of the Drake Company and Participates

question 30

Multiple Choice

Heather is a full-time employee of the Drake Company and participates in the company's flexible spending plan that is available to all employees. Which of the following is correct?

• A) Heather reduced her salary by $1,200, actually spent $1,500, and received only $1,200 as reimbursement for her medical expenses. Heather's gross income will be reduced by $1,500.
• B) Heather reduced her salary by $1,200, and received only $900 as reimbursement for her actual medical expenses. She is not refunded the $300 remaining balance, but her gross income is reduced by $1,200.
• C) Heather reduced her salary by $1,200, and received only $800 as reimbursement for her medical expenses. She is not refunded the $400. Her gross income is reduced by $800.
• D) Heather reduced her salary by $1,200, and received only $900 as reimbursement for her medical expenses. She forfeits the $300. Her gross income is reduced by $300.
• E) None of these.

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Definitions:

Trade

The exchange of goods, services, or both, between parties, either within an economy or between economies.

Price

The amount of money expected, required, or given in payment for something, reflecting its value, cost of production, and market demand.

Produced

The act of creating, manufacturing, or bringing into existence goods and services.

Consumer Surplus

The disparity between what consumers are prepared and can afford to spend on a product or service compared to the actual amount they end up paying.