Question

Sue is an FAU accounting student, who works part-time as a waitress at Busy Burger in Boca. Busy Burger allows all employees a 40 percent discount for any food that they buy and consume on the premises. During 2016, the value of this 40 percent discount for Sue amounted to $2,500 for days on which she was working at Busy Burger (she ate during mealtime at work), and $1,500 for days on which she did not work but still stopped by after class during mealtimes. How much gross income must Sue recognize for 2016 with respect to the discount plan? After appropriate research, prepare (in good form) a short research memorandum (one page) to file. The purpose of this assignment is practice in reading the Code and the regulations. Facts: (optional) Issue: Rules: Conclusion & analysis:

Answer 1

Gross income of Sue for 2016 with respect to the discount plan is 2500 = 1500

Facts:

Busy Burger allows all employees a 40 percent discount for any food that their employees buy and consume on the premises.

Issue:

How to properly account for employee meals in order to keep inventory and financial statements accurate as well as to document employee benefits for expense and tax purposes?

Rules:

Family-owned or small establishments are most likely to offer a family-style meal where staff eat together during a specific time during the day or at the end of a shift.

Larger restaurants typically offer employees one free or discounted meal per shift. Employee meal policy does vary from operation to operation, contingent on the type of food served and overall budget.

Conclusion & analysis:

it is important to accurately track any food given to employees. At the same time, recording employee meals helps to keep an accurate record of the cost of goods sold (COGS).

In determining an employee meal policy for a restaurant, consider the positive aspects of providing the benefit.

• As mentioned, when employees are offered free meals, they are more likely to try different dishes and expand their knowledge of the menu. This, in turn, may lead to better customer service.
• You’ve worked hard to hire and retain the best employees. Keep them happy by keeping their bellies full.
• Employee theft is a harsh fact of life in the restaurant industry. If employees are aware of free or discounted options, they may be less likely to steal food.
• Discounted meals are often provided to employees even during days when they don’t work. This practice encourages employees to bring in friends and relatives who pay full price