Problem: Medical Trials Inc. has a cafeteria plan. Full-time employees are permitted to select any combination of the benefits listed below, but the total value received by each employee must be $6,500 a year or less. 1. Group medical and hospitalization insurance for employee only, $3,600 a year. 2. Group medical and hospitalization insurance for employee's spouse and dependents, $1,200 additional a year. 3. Child-care payments, actual cost not to exceed $5,000. 4. Cash required to bring the total of benefits and cash to $6,500. 5. Universal variable life insurance $1,000. Which of the following statements is true? (All employees are full time.) Chadwick chooses to receive $6,500 cash because his wife's employer provides medical benefits for him. Chadwick has $2,900 of taxable income ($6,500 - $3,600). Erik chooses 1, 2, 5, and $700 cash. He must include $700 in taxable income. River chooses 1 and 2 and $1,700 in child care. He must include the $1,700 in gross income. Suri chooses 1 and 2 and $1,700 cash. Suri must include $1,700 in taxable income.