National Corporation allows an employee, Phyllis, to use a company car for her vacation to San Diego.
I.The employer/employee relationship indicates that the receipt of the use of the car is a type of compensation for services rendered.
II.Income recognition is not necessary in this case.

A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Question

National Corporation allows an employee, Phyllis, to use a company car for her vacation to San Diego.
I.The employer/employee relationship indicates that the receipt of the use of the car is a type of compensation for services rendered.
II.Income recognition is not necessary in this case.
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A)Only statement I is correct.
B)Only statement II is correct.
C)Both statements are correct.
D)Neither statement is correct.

Quizplus · Accepted Answer

Statement I is correct because the use of the company car can be considered a form of compensation for services rendered by Phyllis. However, statement II is incorrect because the value of the personal use of the company car is considered taxable income to the employee and must be recognized on their W-2 form.

National Corporation Allows an Employee, Phyllis, to Use a Company