Brooke Works Part-Time as a Waitress in a Restaurant

question 79

True/False

Brooke works part-time as a waitress in a restaurant. For groups of 7 or more customers, the customer is charged 15% of the bill for Brooke's services. For parties of less than 7, the tips are voluntary. Brooke received $11,000 from the groups of 7 or more and $7,000 in voluntary tips from all other customers. Using the customary 15% rate, her voluntary tips would have been only $6,000. Brooke must include $18,000 ($11,000 + $7,000) in gross income.

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Definitions:

Bad Debt Expense

A cost reported on the income statement, reflecting credit sales that are not expected to be collected.

Retailer

A business entity that sells goods or merchandise directly to consumers.

Collection Process

Procedures followed by a business to collect money owed by customers.

Issuer

The entity responsible for providing a financial instrument or security, such as bonds, shares, or notes, to the market or the public.