Turner, a Successful Executive, Is Negotiating a Compensation Plan with His

question 58

Multiple Choice

Turner, a successful executive, is negotiating a compensation plan with his potential employer.The employer has offered to pay Turner a $600,000 annual salary, payable at the rate of $50,000 per month.Turner counteroffers to receive a monthly salary of $40,000 ($480,000 annually) and a $180,000 bonus in five years when Turner will be age 65.

• A)If the employer accepts Turner's counteroffer, Turner will recognize $660,000 at the time the offer is accepted.
• B)If the employer accepts Turner's counteroffer, Turner will recognize as gross income $55,000 per month [($480,000 + $180,000)/12].
• C)If the employer accepts Turner's counteroffer, Turner will recognize $40,000 income each month for the year and $180,000 in year 5.
• D)If the employer accepts Turner's counteroffer, Turner must recognize imputed interest income on the $180,000 to be received in five years.
• E)None of these.

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Definitions:

Business Laws

Regulations governing the conduct of businesses, including formation, operations, transactions, and dissolution.

Uranium

A heavy metal with atomic number 92, used as fuel in nuclear reactors and in nuclear weapons.

International Firms

Companies that engage in business operations across national borders.

Mining Operations

The process of extracting minerals or other geological materials from the earth.