Jerry Is a Furniture Salesman for Ashland's Furniture Mart

question 126

Multiple Choice

Jerry is a furniture salesman for Ashland's Furniture Mart. Jerry purchases a bedroom suite from Ashland's for $10,000. The sticker price is $14,000. Ashland's policy is to "discount" all customer purchases for up to $2,000 off of the sticker price for purchases over $10,000. What is the tax treatment of Jerry's furniture purchase?
I.Jerry must include $4,000 in his gross income.
II.Ashland's Furniture Mart can deduct $2,000 as compensation expense in addition to properly accounting for the sale of the furniture.
​

• A)Only statement I is correct.
• B)Only statement II is correct.
• C)Both statements are correct.
• D)Neither statement is correct.

---

Definitions:

Social Loafing

The phenomenon where individuals exert less effort to achieve a goal when they work in a group than when they work alone.

Group Polarization

The tendency for group members' opinions to become more extreme (either stronger or weaker) after group discussions.

Bystander Effect

A social psychological phenomenon in which individuals are less likely to offer help to a victim when other people are present.

Diffusion of Responsibility

A phenomenon where individuals in a group are less likely to take action or feel a sense of responsibility because the responsibility is perceived to be shared among all group members.