The PX Company manufactures automobiles. Nonmanagement employees of the company can buy a new automobile for PX's cost plus 2%. The automobiles are sold to dealers at cost plus 20%. Generally, management employees of Local Dealer, Inc., are allowed to buy a new automobile from the company at the dealer's cost. Which of the
The PX Company manufactures automobiles. Nonmanagement employees of the company can buy a new automobile for PX's cost plus 2%. The automobiles are sold to dealers at cost plus 20%. Generally, management employees of Local Dealer, Inc., are allowed to buy a new automobile from the company at the dealer's cost. Which of the
Chapter1: Financial Statements And Business Decisions
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25. The PX Company manufactures automobiles. Nonmanagement employees of the company can buy a new automobile for PX's cost plus 2%. The automobiles are sold to dealers at cost plus 20%. Generally, management employees of Local Dealer, Inc., are allowed to buy a new automobile from the company at the dealer's cost. Which of the following statements is correct?
a.None of the employees who take advantage of the fringe benefits described above are required to recognize income.
b.The nonmanagement employees who buy automobiles at a discount are not required to recognize income from the purchase.
c.Employees of Royal are required to recognize as gross income 18% (20% – 2%) of the cost of the automobile purchased.
d.All of these choices are correct.
Expert Solution
Correct option
Correct option is C) employees of royal must recognize gross income 18% of the cost of the automobile purchased.
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