ACCT 429 Week 6 Quiz

 ACCT 429 Week 6 Quiz | Devry University

Question 1

 (CO 1) Which of the following corporations are eligible to make the S election?

  

A.      Limited liability company.  

B.      Insurance company.  

C.      U.S bank.  

D.      All of the above

 

Question 2

 (CO 10) Ron Miller is the sole shareholder of an S corporation. During 2018, Ron received a distribution of $20,000. His basis in the stock at December 31, 2017 was $5,000. The S corporation earned ordinary income of $12,000 in 2018. The corporation had no accumulated E & P. What should be the amount of capital gain for Ron?

A.      $3,000  

B.      $5,000  

C.      $15,000  

D.      $25,000

 

Question 3

 (CO 10) Jack Slater is the sole shareholder of an S corporation. During 2018, Jack received a distribution of $22,000. His basis in the stock at December 31, 2017 was $2,000. The S corporation earned ordinary income of $12,000 in 2018. The corporation had no accumulated E & P. What should be the amount of return of capital for Jack?

  

A.      $2,000  

B.      $12,000  

C.      $14,000  

D.      $8,000

 

Question 4

 (CO 10) Linda owns 30% of the stock in an S corporation. Linda’s basis in the S corporation stock at December 31, 2017 was $14,000. Income reported by the S corporation during 2018 was $100,000. Linda received a distribution of $17,000 during the year. What should be Linda’s basis in the S corporation stock at December 31, 2018?

  

A.      $27,000  

B.      $114,000  

C.      $97,000  

D.      $31,000

 

Question 5

 (CO 10) Larry and Barry owned equally all of the stock of an S corporation. The S corporation has a loss of $80,000 during a non-leap year. Larry sells his one half interest in the S corporation stock to his friend, James, on the 150th day of the year. How much of the loss should be allocated to Larry rounded to the nearest dollar?

  

A.      $40,000  

B.      $47,123  

C.      $16,438  

D.      $23,562

 

Question 6

 (CO 1) During 2018, Carmen had salary income of $90,000 and the following capital transactions:

LTCG      $4,000

LTCL       $5,000

STCG     $4,000

STCL       $2,000

 

How are these transactions handled for income tax purposes? Explain.

A.      for the year 2018 carmen will have a net LTCG of $1,000($5,000-$4,000). and  a net STCG of $2,000($4,000-$2,000) .His LTCG will be taxed at a maximum rate of 20%  and the STCG will be taxed  at  ordinary income tax rates .

B.      Combining the long-term transactions yields a net LTCL of $1,000 ($4,000 - $5,000), and the short-term process results in a net STCG of $2,000 ($4,000 - $2,000). A further combination leaves a net STCG of $1,000 ($2,000 - $1,000), which is taxed as ordinary income. Only net LTCG results in preferential tax treatment.