Question

Wilma has a $57,500 certificate of deposit (CD) at the local bank. The interest on this certificate, $1,150, was credited to her account this year but she must pay an early withdrawal penalty if she cashes in the CD before next year. Which of the following is a true statement?

A. Wilma must include the $1,150 of interest in her income this year.
B. Wilma must include the $1,150 of interest in her income when she cashes the CD.
C. Wilma must include the $1,150 of interest in her income this year only if the bank waives the early withdrawal penalty.
D. Wilma must include the $1,150 of interest in her income next year if she does not pay the early withdrawal penalty.
E. All of the choices are correct.

Answer 1

Answer: Wilma must include the $1,150 of interest in her income this year

Explanation: Wilma must include the $1,150 of interest in her income this year because the interest on the certificate, was credited to her account this year and as that, it is a part of her income for the year.