1- The Royal Motor Company manufactures automobiles. Non management employees of the company can buy a new automobile for Royals 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 dealers cost. Which of the following statements is correct?

a. The non management employees who buy automobiles at a discount are not required to recognize income from the purchase.

b. None of the employees who take advantage of the fringe benefits described above are required to recognize income.

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.

e. None of these.

2- Peggy is an executive for the Tan Furniture Manufacturing Company. She purchased furniture from the company for $9,500, the price Tan ordinarily would charge a wholesaler for the same items. The retail price of the furniture was $12,500, and Tans cost was $9,000. The company also paid for Peggys parking space in a garage near the office. The parking fee was $600 for the year. All employees are allowed to buy furniture at a discounted price comparable to that charged to Peggy. However, the company does not pay other employees parking fees. Peggys gross income from the above is:

a. $0

b. $600.

c. $3,500.

d. $4,100.

e. None of these.

Please answer BOTH questions. Thank you:)