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:

Internal Rate Of Return

The internal rate of return is a financial metric used to evaluate the profitability of investments, calculating the discount rate that makes the net present value of cash flows from an investment equal to zero.

Hurdle Rate

The minimum rate of return on a project or investment required by a manager or investor, often used in capital budgeting to measure investment risk.

Compound Interest Table

A table that shows the amount of compound interest that will be accrued on a principal amount over a period of time at various interest rates.

Salvage Value

The expected end-of-life value of an asset after its useful period has ended.