This Year, Mrs

question 42

Multiple Choice

This year, Mrs. Pike's compensation from her corporate employer consisted of $325,000 current salary and $75,000 unfunded deferred compensation payable upon her retirement at age 66. Which of the following statements is true?

• A) This year, Mrs. Pike must include $400,000 in gross income, and her employer is allowed a $400,000 deduction.
• B) This year, Mrs. Pike must include $325,000 in gross income, and her employer is allowed a $400,000 deduction.
• C) This year, Mrs. Pike must include $400,000 in gross income, and her employer is allowed a $325,000 deduction.
• D) This year, Mrs. Pike must include $325,000 in gross income, and her employer is allowed a $325,000 deduction.

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Definitions:

Cost of Goods Sold

The direct costs attributable to the production of the goods sold by a company, including materials, labor, and overhead.

Weighted-Average

A calculation that takes into account the varying degrees of importance of the numbers in a data set, giving more weight to some numbers than others.

Cost of Goods

The total expense incurred to create products or services sold by a company, including labor, materials, and overhead.