Jones Operates an Upscale Restaurant and He Pays Experienced Cooks

question 11

Multiple Choice

Jones operates an upscale restaurant and he pays experienced cooks $35,000 per year.This year he hired his son as an apprentice cook. Jones agreed to pay his son $40,000 per year. Which of the following is a true statement about this transaction?

• A) Jones will be allowed to deduct $35,000 as compensation and another $5,000 can be deducted as an employee gift.
• B) Jones can only deduct $20,000 because an apprentice cook is only worth half as much as an experienced cook.
• C) Jones will be allowed to accrue $40,000 only if he pays his son in cash.
• D) Jones will be allowed to deduct $40,000 only if his son eventually develops into an expert cook.
• E) None of the choices are true.

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Definitions:

Illegal

Pertains to actions, behaviors, or conditions that are against the law or statutory requirements.

Oligopoly

A market configuration where a few companies have substantial influence over the pricing and competitive landscape.

Large Firms

Companies that are considerable in size, often having extensive operations, large revenues, and many employees, playing significant roles in their industries.

Price Leadership

A strategy where the dominant firm in a market sets the price of goods or services, and other competitors in the market follow suit.