Final answer:
The idea that employees at Fresh Bakery do not need to recognize gross income for taking home unsold donuts is false, as the value of goods received as non-cash compensation is generally taxable. 'Mom and Pop' grocery stores may exist without economic profits due to sufficient accounting profits and the non-monetary benefits they receive. Underemployment occurs when someone works in a field not related to their skill set or qualifications. The correct answer is b. False.
Step-by-step explanation:
The statement that employees at Fresh Bakery are not required to recognize gross income because the bakery does not incur any additional cost is false. According to tax laws, the value of any goods employees receive as a form of compensation is generally considered taxable income, regardless of whether the business incurs an additional cost. This principle applies to small businesses and large corporations alike.
For example, when employees are allowed to take home unsold donuts from Fresh Bakery, the market value of those donuts should be included in the employee's gross income. This is because it is a form of non-cash compensation for the services the employees provide to the bakery. The fact that the bakery does not incur additional costs by giving away the donuts does not exempt this from being taxable income.
Mom and Pop firms, such as inner city grocery stores, continue to exist even without economic profits due to several factors. They might be deriving enough to cover their accounting profits, which includes salaries for the owners and other expenses. They may also value non-monetary benefits like being their own boss, serving their community, or the convenience of working close to home.
Additionally, a construction worker taking a temporary job at a fast food restaurant, as mentioned in option d, is an example of underemployment, where the worker is employed below their skill level or in an unrelated field.