Question 1

What are the effects of a below-market loan for $100,000 made by a corporation to its chief executive officer as an enticement to get him to remain with the company?

Accepted Answer

A)   The corporation has imputed interest income and the employee is deemed to have received a gift.
B)   The corporation has imputed interest income and dividends paid.
C)   The employee has no income unless the funds are invested and produce investment income for the year.
D)   The employee has imputed compensation income and the corporation has imputed interest income.
E)   None of these.F) A) and B)
G) C) and E)

Question 2

Maroon & Orange Gym, Inc., uses the accrual method of accounting. The corporation sells memberships that entitle the member to use the facilities at any time. A one-year membership costs $480 ($480/12 = $40 per month) ; a two- year membership costs $720 ($720/24 = $30 per month) . Cash payment is required at the beginning of the membership period. On July 1, 2019, the company sold a one-year membership and a two-year membership. For financial reporting purposes, Maroon reports the membership income ratably over the number of months involved. The company should report as gross income from the two contracts:

Accepted Answer

A)   $1,200 in 2019.
B)   $960 in 2019.
C)   $180 in 2021.
D)   $780 in 2020.
E)   None of these.F) C) and D)
G) A) and B)

Exam 4: Gross Income: Concepts and Inclusions

What are the effects of a below-market loan for $100,000 made by a corporation to its chief executive officer as an enticement to get him to remain with the company?

Correct Answer
verified

Correct Answer
verified

Exam 4: Gross Income: Concepts and Inclusions

What are the effects of a below-market loan for $100,000 made by a corporation to its chief executive officer as an enticement to get him to remain with the company?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified