Question

Karl works at Moe's grocery. This year Karl was paid $50,000 in salary but he was allowed to purchase his groceries at 10% below Moe's cost. This year Karl spent $5,760 to purchase groceries costing Moe $6,400 and worth $9,600. What amount must Karl include in his gross income?

Answer 1

Karl must include a benefit of $3,840 in his gross income.

Step-by-step explanation:

To calculate the amount Karl must include in his gross income, we need to determine the value of the groceries he purchased at 10% below Moe's cost. The cost to Moe was $6,400, so the cost to Karl would be $6,400 - ($6,400 * 0.1) = $5,760.

Karl spent $5,760 on groceries that were worth $9,600. Therefore, he received a benefit of $3,840 ($9,600 - $5,760). This benefit, known as an employee discount, must be included in Karl's gross income.

Answer 2

Amount to be included will be $50240

Step-by-step explanation:

We have given Karl works at Moe's grocery and Karl was paid by $50000

It is also given this year Karl spent $5760 on groceries and costing Moe $6400

Employees must recognize imputed income to the extent they are allowed to purchase goods from their employer at a price below the employer's cost.

So amount to be included = $50000 + ( $6400 - $5760) = $50000+$240 = $50240

So amount to be included will be $50240