Mike Contracted with Kram Company, Mike's Controlled Corporation

question 53

Multiple Choice

Mike contracted with Kram Company, Mike's controlled corporation.Mike was a medical doctor and the contract provided that he would work exclusively for the corporation.No other doctor worked for the corporation.The corporation contracted to perform an operation for Rosa for $8,000.The corporation paid Mike $6,500 to perform the operation under the terms of his employment contract.

• A)Mike's gross income is $6,500.
• B)Mike must recognize the $8,000 gross income because he provided the service.
• C)Mike must recognize $8,000 gross income since the patient obviously wanted him to perform the operation.
• D)The Kram Company corporation's gross income is $1,500.
• E)None of the above.

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Definitions:

Inventory Turnover

A measure that reveals the frequency at which a firm's stock is sold and replenished within a given timeframe, demonstrating the effectiveness of its inventory control.

Accounts Receivable Turnover

A financial ratio indicating how many times a company collects its average accounts receivable balance in a given period.

Year 2

Designates the second fiscal or calendar year in a sequence of years, crucial for tracking progress, budgets, and planning in various contexts.

Average Collection Period

The average amount of time it takes for a business to receive payments owed by its customers for goods or services sold on credit.