Evaluate the options and advise him on the tax consequence

Assignment Help Financial Accounting

Reference no: EM131258180

A company would like to provide life insurance coverage for its employees. The company has three officers who make $100,000 each per year and three staff employees who make $40,000 each per year. The president comes to you asking for your advice on how to provide the coverage. He provides you with the following three options, each of which will cost the company $15,000 per year.

Option 1 - Give each employee $2,500 to purchase coverage.

Option 2 - Buy a group term life insurance policy in which each employee would be covered for an amount equal to double their annual salary.

Option 3 - Buy a whole life insurance policy which would provide each employee with $100,000 worth of coverage.

Evaluate the options and advise him on the tax consequence for each. Provide your recommendation of which option the president should choose for the company.

Reference no: EM131258180

Questions Cloud

Explain the effect on share capital and revaluation surplus : The company declares and pay 1:5 bonus issue out of the company’s revaluation surplus. The company’s share capital is $500,000 and the value of the revaluation surplus is $200,000. Indicate whether this action lead to an increase, decreases or have n..

Using the trend projection method : Sales of? Volkswagen's popular Beetle have grown steadily at auto dealerships in Nevada during the past 5 years. Forecasted sales for year 6 using the trend projection? (linear regression) method are 619.3 sales. The MSE for the linear regression for..

Calculate the maintenance cost : The cost formula for the maintenance department of Rainbow, Ltd., is $19,300 per month plus $7.60 per machine hour used by the production department. Calculate the maintenance cost that would be budgeted for a month in which 6,700 machine hours are p..

Calculate the labor cost and materials cost : In December, Sara’s Sodas produced 4.1 million liters of the beverage. Manufacturing overhead was $1,405,000 and the cost per liter was $0.41. Labor costs were 20 percent of materials cost. Calculate the materials cost for December. Calculate the lab..

Evaluate the options and advise him on the tax consequence : A company would like to provide life insurance coverage for its employees. The company has three officers who make $100,000 each per year and three staff employees who make $40,000 each per year. The president comes to you asking for your advice on h..

Uses double-weighted sales factor-apportionment formula : Beckett Corporation realized $800,000 of taxable income from the sales of its porducts in States A and B. Beckett's activites establish nexus for income tax purposes in both states. State B uses a double - weighted sales factor in its three-factor ap..

Estimates of the market values of the assets : Leland Co. paid $1,500,000 for a purchase that included land, building, and office furniture. An appraiser provided the following estimates of the market values of the assets if they had been purchased separately: Land, $336,000, Building, $832,000, ..

Purchases and sales of merchandise-cash flows : Two Wheeler, a bike shop, opened for business on April 1. It uses a periodic inventory system. The following transactions occurred during the first month of business. For each of the following transactions of Two Wheeler, prepare the appropriate jour..

Future value of annuity-compute the fund balance : Pearson Corporation having recently issued a $25 million, 10-year bond issues, is required to make annual year-end sinking fund deposits of $ 1,800,000. The deposits are made on the last of each year and yield a return of 5%. Compute the fund balance..

User Account

All Pages