Ridge Is the Manager of a Motel

question 31

Multiple Choice

Ridge is the manager of a motel. As a condition of his employment, Ridge is required to live in a room on the premises so that he would be there in case of emergencies. Ridge considered this a fringe benefit, since he would otherwise be required to pay $800 per month rent. The room that Ridge occupied normally rented for $70 per night, or $2,100 per month. On the average, 90% of the motel rooms were occupied. As a result of this rent-free use of a room, Ridge is required to include in gross income.

• A)$0.
• B)$800 per month.
• C)$2,100 per month.
• D)$1,890 ($2,100 × .90).
• E)None of these.

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Definitions:

Gross Monthly Income

The gross amount of earnings received in a month prior to any deductions or taxes being subtracted.

Living Expenses

costs associated with day-to-day life, such as housing, food, and transportation.

Percent Rate

The percentage that indicates the rate at which a certain value, such as interest, increases or decreases.

Percent Rate

a rate that describes a portion of a hundred in finance, often related to interest or growth rates.