For Purposes of Determining Gross Income, Which of the Following

question 91

Multiple Choice

For purposes of determining gross income, which of the following is true?

• A)A mechanic completed repairs on an automobile during the year and collects money from the customer.The customer was not satisfied with the repairs and sued the mechanic for a refund.The mechanic can defer recognition of the income until the suit has been settled.
• B)A taxpayer who finds a wallet full of money is required to recognize income even though someone may eventually ask for the return of the money.
• C)Embezzlement proceeds are not included in the embezzler's gross income because the embezzler has an obligation to repay the owner.
• D)All of these are false.
• E)All of these are true.

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Definitions:

Variable Cost

A cost that varies directly with the level of production or business activity, such as materials and labor directly involved in production.

Overhead Costs

Indirect costs not directly attributed to the production of goods or services, such as rent, utilities, and administrative expenses.

Machine Setups

The process of configuring or preparing machinery for a particular job, task, or production run.

Variable Cost

Expenses that change in proportion to the level of goods or services produced, such as raw materials or direct labor costs.