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Accounting four MCQs




Question;1. (TCO 3) As of January 1, Spruce Corporation has a deficit in accumulated E & P of $37,500. For tax year, current E & P (all of which accrued ratably) is $20,000 (prior to any distribution). On July 1, Spruce Corporation distributes $25,000 to its sole, noncorporate shareholder. The amount of the distribution that is a dividend is (Points: 2)$0.$20,000.$25,000.$37,500.None of the above2. (TCO 3) Glenda is the sole shareholder of Condor Corporation. She sold her stock to Melissa on October 31 for $150,000. Glenda's basis in Condor stock was $50,000 at the start of the year. Condor distributed land to Glenda immediately before the sale. Condor's basis in the land was $20,000 (fair market value of $25,000). On December 31, Melissa received a $75,000 cash distribution from Condor. During the year, Condor has $20,000 of current E & P and its accumulated E & P balance on January 1 is $10,000. Which statement is true? (Points: 2)Glenda recognizes a $110,000 gain on the sale of her stock.Glenda recognizes a $100,000 gain on the sale of her stock.Melissa receives $5,000 of dividend income.Glenda receives $20,000 of dividend income.None of the above3. (TCO 3) Which does not increase the E & P of a corporation? (Points: 2)Dividends received deductionCollection of proceeds from an insurance policy on the life of a key employeeFederal income tax refundCharitable contributions in excess of 10% limitationNone of the above4. (TCO 3) Walnut Corporation, a calendar-year taxpayer, has taxable income of $110,000 for the year. In reviewing Walnut?s financial records, you discover the following occurred this year.Federal income taxes paid: $25,000Net operating loss carry forward deducted currently: $25,000Gain recognized this year on an installment sale from a prior year: $12,000Depreciation deducted on tax return (ADS depreciation would have been $8,000): $15,000Interest income from Wisconsin state bonds: $37,000Walnut Corporation's current E & P is (Points: 2)$73,000.$138,000.$142,000.$166,000.None of the above


Paper#42311 | Written in 18-Jul-2015

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