Ramsey Corporation Allows an Employee, Corrine, to Use a Company

question 52

Multiple Choice

Ramsey Corporation allows an employee, Corrine, to use a company car for her vacation to San Diego.
I.Corrine will not need to recognize the value of the use of the car since it was not cash.
II.A "cash equivalent approach" is used to measure the amount of income that must be recognized by Corrine.
III.The employer/employee relationship indicates that the receipt of the use of the car is a type of compensation for services rendered.
IV.Income recognition is not necessary in this case.
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• A)Only statement I is correct.
• B)Only statement IV is correct.
• C)Only statements II and III are correct.
• D)Only statements I and IV are correct.
• E)Only statements II, III, and IV are correct.

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Definitions:

Plowback Ratio

A measure of how much earnings are retained by a company after dividends are paid, as opposed to being paid out to shareholders.

Finance Perspective

A viewpoint or method of considering financial aspects and impacts in decision making or analysis.

Capacity Utilization

The percentage of a company or factory's total production capacity that is currently being used.

Pro Forma Statement

An anticipated financial document generated based on hypothetical events and transactions that are yet to happen.