Imelda reports only half the cash from the vending machines on her cash flow statement and income tax returns. Her purpose in doing so is to
A) reduce her income tax liability.
B) increase her net income on the financial statement.
C) retain the cash for reinvestment in the business.
D) make the business more attractive to a buyer.

Question

Quizplus · Accepted Answer

Imelda's purpose in reporting only half the cash from the vending machines is to reduce her income tax liability. This is a form of tax evasion and is illegal. By not reporting all the cash, she may think she is saving money in the short-term, but she is risking penalties and fines in the long-term if she gets caught. Additionally, this misrepresents the true financial position of her business, which can be damaging in the long run.

Imelda Reports Only Half the Cash from the Vending Machines