Alexis Corporation allows an employee, Cynthia, to use a company car for her vacation to San Diego.
I.Cynthia 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 Cynthia.

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

Question

Alexis Corporation allows an employee, Cynthia, to use a company car for her vacation to San Diego.
I.Cynthia 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 Cynthia.
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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

Under the "cash equivalent approach," the value of the use of the company car must be treated as taxable income and recognized by the employee. Therefore, statement II is correct while statement I is incorrect.

Alexis Corporation Allows an Employee, Cynthia, to Use a Company