Kristen's Employer Owns Its Building and Provides Parking Space for Its

question 11

Multiple Choice

Kristen's employer owns its building and provides parking space for its employees. The value of the free parking is $150 per month. Karen's employer does not have parking facilities, but reimburses its employee for the cost of parking in a nearby garage, up to $150 per month.

• A) Kristen and Karen must recognize gross income from the parking services.
• B) Kristen can exclude the employer provided parking from gross income, but Karen must include her reimbursement in gross income.
• C) Kristen must include the value of the employer provided parking from her gross income, but Karen can exclude her reimbursement from gross income.
• D) Neither Kristen nor Karen is required to include the cost of parking in gross income.
• E) None of these.

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Definitions:

Variable Costing

A costing method where variable manufacturing costs are treated as product costs, and fixed manufacturing overhead is treated as a period cost.

Net Income

The amount of earnings left after all expenses, including taxes and costs, have been subtracted from total revenue.

Fixed Overhead

Fixed overhead consists of the consistent, ongoing costs not directly tied to production levels within a business, such as rent, insurance, and salaries.

Inventory

Items held by a company for sale in the ordinary course of business or to be used in producing goods and services for sale.