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.

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.

Question

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.

Quizplus · Accepted Answer

Statement II is correct because the "cash equivalent approach" is often used to determine the value of non-cash compensation, such as the use of a company car. Statement III is also correct because the employer/employee relationship implies that the use of the car is a form of compensation. Statement I is incorrect because the value of the use of the car is still a type of income that must be recognized. Statement IV is incorrect because income recognition is required in this case. Therefore, the best choice is C - only statements II and III are correct.

Ramsey Corporation Allows an Employee, Corrine, to Use a Company