Question

Melody works for a company with only 22 employees. Her employer contributed $2,000 to her health savings account (HSA), and the account earned $100 in interest during the year. Melody withdrew only $1,200 to pay medical expenses during the year. Melody is not required to recognize any gross income from the HSA for the year. What is the total amount in Melody's HSA at the end of the year?

1) $900
2) $1,900
3) $2,100
4) $2,200

Answer 1

Melody's HSA at the end of the year has $900 remaining after considering her employer's $2,000 contribution, $100 in interest earned, and a $1,200 withdrawal for medical expenses.

Step-by-step explanation:

To calculate the total amount in Melody's Health Savings Account (HSA) at the end of the year, we need to add the employer's contribution and the interest earned, then subtract the amount Melody withdrew for medical expenses. The calculation is as follows:

Starting balance = $0 (assuming the account was empty at the beginning of the year)
Employer's contribution = $2,000
Interest earned = $100
Total before withdrawals = $2,000 (employer's contribution) + $100 (interest) = $2,100
Medical expenses withdrawal = $1,200
Ending balance = $2,100 - $1,200 = $900

Therefore, the correct answer is $900, which means option 1 is the correct choice for the total amount in Melody's HSA at the end of the year.