Kristen's Employer Owns Its Building and Provides Parking Space for Its

question 11

Multiple Choice

Kristen's employer owns its building and provides parking space for its employees. The value of the free parking is $150 per month. Karen's employer does not have parking facilities, but reimburses its employee for the cost of parking in a nearby garage, up to $150 per month.

• A) Kristen and Karen must recognize gross income from the parking services.
• B) Kristen can exclude the employer provided parking from gross income, but Karen must include her reimbursement in gross income.
• C) Kristen must include the value of the employer provided parking from her gross income, but Karen can exclude her reimbursement from gross income.
• D) Neither Kristen nor Karen is required to include the cost of parking in gross income.
• E) None of these.

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Definitions:

Cash Management

Cash management involves the collection, handling, and usage of cash. It aims to manage a company's short-term financial stability and liquidity.

Adequate Liquidity

The ability of an entity to meet its short-term financial obligations with its readily available assets.

Accounts Receivable Factor

A financial transaction where a company sells its accounts receivable to a third party (factor) at a discount, to obtain immediate cash.

Bad Debt Risk

The risk that money owed to a company by debtors will not be paid and thus become a bad debt.