Graham Has Accepted an Offer to Do Graduate Work in the Chemistry

question 69

Multiple Choice

Graham has accepted an offer to do graduate work in the chemistry department at State University. The chemistry department offered Graham a $5,000 tuition reduction and $3,500 toward the cost of room and meals. Under the terms of the scholarship Graham must work in the chemistry labs during the summer as a research assistant. What amount must Graham include in his gross income?

• A) $8,500
• B) $5,000
• C) $3,500
• D) $2,500
• E) Zero - None of these benefits is included in gross income

---

Definitions:

Allowance for Doubtful Accounts

An estimate of the amount of accounts receivable that may not be collectible, recorded as a contra asset account.

Uncollectible Accounts

Accounts receivable that are considered to be uncollectable from debtors, leading to them being written off as a bad debt expense.

Net Credit Sales

Sales made on credit minus any returns or allowances, indicating the actual credit sales revenue generated during a period.

Balance Sheet Approach

A method in financial analysis that focuses on the balance sheet and its components: assets, liabilities, and equity.