Final answer:
The correct statement is option c. Sue, a full-time employee, elects to receive choices I, II, and $3,200 for III. Sue is required to include $3,200 in gross income.
Step-by-step explanation:
The correct statement is option c. Sue, a full-time employee, elects to receive choices I, II, and $3,200 for III. Sue is required to include $3,200 in gross income.
According to the information provided, full-time employees under the Swan Company's cafeteria plan can select any combination of the benefits but the total received cannot exceed $8,000 a year. Sue has selected choices I (Group medical and hospitalization insurance for the employee), II (Group medical and hospitalization insurance for the employee's spouse and children), and $3,200 for III (child-care payments).
Since the total amount of Sue's benefits ($3,600 + $1,200 + $3,200) exceeds $8,000, she is required to include the excess amount ($3,200) in her gross income.