In Which of the Following Will the Constructive Receipt Doctrine

question 101

Multiple Choice

In which of the following will the Constructive Receipt Doctrine require reporting income in 2016?
I.Cornell's December 2016 salary check is withheld until January 15,2017,because the employer does not have sufficient cash to cover its December payroll.
II.Donnie is an employee of Holt Corporation.The corporation regularly mails payroll checks to employees to arrive on or before the last day of each month.Donnie's check arrives in the mail at his house on December 31,2016.However,Donnie was vacationing in Cancun and did not return until January 8,2017.Donnie deposited the check into his account the next day.
III.In December 2016,Cory signs a contract to play basketball for the Rhythms.He receives a signing bonus of $2,000,000 to be paid over 5 years beginning in 2017.His regular salary of $800,000 will be paid monthly during the season that begins in 2017.
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• A)Statements I, II, and III are correct.
• B)Statements II and III are correct.
• C)Statements I and II are correct.
• D)Only statement II is correct.
• E)Only statement III is correct.

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Definitions:

Operating Income

The profit realized from a business's core operations, excluding income from investments and the effects of taxes and interest.

Variable Costs

Costs that vary in direct proportion to the level of production or sales volume, like raw materials and direct labor.

Fixed Costs

Costs that do not vary with the level of production or sales over a specified period, such as rent or salaries.

Operating Income

The profit realized from a business's operations after subtracting operating expenses from gross profits.