In Which of the Following Will the Constructive Receipt Doctrine

question 102

Multiple Choice

In which of the following will the Constructive Receipt Doctrine require reporting income in 2018?
I.Cornell's December 2018 salary check is withheld until January 15, 2019, 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, 2018. However, Donnie was vacationing in Cancun and did not return until January 8, 2019. Donnie deposited the check into his account the next day.
III.In December 2018, 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 2019. His regular salary of $800,000 will be paid monthly during the season that begins in 2019.
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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:

Cost Equation

An equation used to estimate costs, typically in the form of fixed costs plus variable costs times the number of units.

Variable Costs

Expenses that vary directly with the level of production or sales volume, such as materials and labor.

Pretax Income

The income that a company earns before any taxes are deducted, representing the profitability of the company before government intervention.

Break-even Point

The level of production or sales at which total costs equal total revenues, resulting in no profit or loss.