Solution :
Method I : SL method
Cost of equipment = $ 500,000
Salvage value = $ 50,000
Expected life = 5 years
Depreciation = [tex]$\frac{\text{(cost of equipment - salvage value)}}{\text{expected life}}$[/tex]
[tex]$=\frac{(500,000-50,000)}{5}$[/tex]
= 90,000
Therefore, the [tex]$\text{depreciation}$[/tex] is $ 90,000 using the SL method.
Method II : DDB method
Cost of equipment = $ 500,000
Expected life = 5 years
So, calculating the [tex]$\text{depreciation}$[/tex] at the end of the year 1 is :
Depreciation = [tex]$\text{cost of equipment }\times \frac{2}{\text{expected life}}$[/tex]
[tex]$=500,000\times \frac{2}{5}$[/tex]
= $ 200,000
So the book value at the end of the year 1 = $ 500,000 - $ 200,000
= $ 300,000
Now calculating the [tex]$\text{depreciation}$[/tex] at the end of the year 2 is :
Depreciation = [tex]$\text{book value at the end of year 1 }\times \frac{2}{\text{expected life}}$[/tex]
[tex]$=300,000\times \frac{2}{5}$[/tex]
= $ 120,000
Therefore, the [tex]$\text{depreciating}$[/tex] value is $ 120,000 using the DDB method.
Method III : 150% DB method
Cost of equipment = $ 500,000
Expected life = 5 years
So, calculating the depreciation in year 1 is :
Depreciation = [tex]$\text{cost of equipment }\times \frac{1.5}{\text{expected life}}$[/tex]
[tex]$=500,000\times \frac{1.5}{5}$[/tex]
= $ 150,000
So the book value at the end of the year 1 = $ 500,000 - $ 150,000
= $ 350,000
Now calculating the depreciation in year 2 is :
Depreciation = [tex]$\text{book value at the end of year 1 }\times \frac{1.5}{\text{expected life}}$[/tex]
[tex]$=350,000\times \frac{1.5}{5}$[/tex]
= $ 105,000
Therefore, the [tex]$\text{depreciating}$[/tex] value is $ 105,000 using the 150% DB method.
Ivan invests in land, and Grace invests in taxable bonds. The land appreciates by $8,000 each year, and the bonds earn interest of $8,000 each year. After holding the land and bonds for five years, Ivan and Grace sell them. There is a $40,000 realized gain on the sale of the land and no realized gain or loss on the sale of the bonds. Are the tax consequences to Ivan and Grace the same for each of the five years? Explain.
Answer: No. The tax consequences to Ivan and Grace isn't the same for each of the five years.
Explanation:
We should note that the taxes on the land will be charged on the interest when the land is sold and a gain is made.
For the bond, there'll be a tax in the interest income for every fiscal period usually a year but there will not be a tax on the bond's final sale due to the fact that no gain was received on its sale
Therefore, based on the information given above, tax consequences to Ivan and Grace isn't the same for each of the five years.
As part of a valuation analysis, you have identified two comparables: KLA Tencor (KLA) and Lam Research (LAM). KLA has company value of $9,600, market value of equity of $8,000, and net income of $400. LAM has company value of $12,000, market value of equity of $6,000, and net income of $500. If KLA has NOPAT of 400 and LAM has NOPAT of 600, the P/E ratios for KLA and LAM should be, respectively: Group of answer choices 20 and 12 14 and 8 Not enough information 40 and 30 24 and 20
Answer:
The correct option is 20 and 12. That is, the P/E ratios for KLA and LAM should be, respectively: 20 and 12.
Explanation:
The price-earnings (P/E) ratio can be calculated using the following formula:
P/E ratio = Market value of equity / Net income ............... (1)
From the question. we hav:
KLA market value of equity = $8,000
KLA net income = $400
LAM market value of equity = $6,000
LAM net income = $500
Using equation (1) and the above information, we have:
P/E ratios for KLA = $8,000 / $400 = 20
P/E ratios for LAM = $6,000 / $500 = 12
Therefore, the correct option is 20 and 12. That is, the P/E ratios for KLA and LAM should be, respectively: 20 and 12.
Top Sound International designs and sells high-end stereo equipment for auto and home use. Engineers notified management in December 2018 of a circuit flaw in an amplifier that poses a potential fire hazard. Further investigation indicates that a product recall is probable, estimated to cost the company $2.8 million. The fiscal year ends on December 31. Should this contingent liability be reported, disclosed in a note only, or neither?
Answer:
Yes
Explanation:
Since in the question it is mentioned that the product recall is probable and predicted that the cost to the company is $2.8 million so this represent the contingent liability as it is probable & estimated
So the same should be disclosed and reported
Hence, the answer should be yes
The same is to considered relevant
g It is claimed that 1800 gallons of water are needed to produce one pound of beef, i.e., to grow the crops that feed the cattle and to provide the animals with drinking water. This water _______. Group of answer choices is permanently removed from the water cycle remains in the water cycle, but is forever polluted and thus no longer available for potable water usage remains in the water cycle and can be cleaned for future water usages None of these
Answer: remains in the water cycle and can be cleaned for future water usages.
Explanation:
Water never really leaves the earth as it just renters the water cycle where it can be cleaned and used fir future demand.
The water that was used to water the plants, will be lost to the atmosphere through evapotranspiration where it will condense and fall back as rain eventually.
The water the cattle drank will come back into the water cycle as urine and sweat where it can then be cleaned and used again for future demand. For instance, we are still drinking water that was drunk by dinosaurs.
The way the staff looks tells the customer a great deal about the way the organization is managed.
True
False
Carrie D's has 8 million shares of common stock outstanding, 6 million shares of preferred stock outstanding, and 30 thousand bonds. If the common shares are selling for $12 per share, the preferred shares are selling for $30 per share, and the bonds are selling for 110 percent of par, what would be the weight used for equity in the computation of Carrie D's WACC
Answer:
Weight of equity = 0.31067 or 31.067% or 96/309
Explanation:
WACC or weighted average cost of capital is the cost of a firm's capital structure which can comprise of debt, preferred stock and common equity. The WACC for a firm can be calculated as follows,
WACC = wD * rD * (1-tax rate) + wP * rP + wE * rE
Where,
w represents the weight of each component based on market value in the capital structure r represents the cost of each component D, P and E represents debt, preferred stock and common equity respectively
To calculate the weight of equity in WACC computation, we first need to find out the Market value(MV) of each component and the market value of the overall capital structure.
MV of common equity = 8 million shares * 12 per share
MV of common equity = $96 million
MV of Preferred stock = 6 million shares * 30 per share
MV of Preferred stock = $180 million
The bonds are usually have a par value of $1000 unless specified otherwise.
MV of debt = 30 thousand * $1000 * 110%
MV of debt = $33 million
MV of total capital Structure = 96 + 180 + 33 => $309 million
Weight of equity = 96 / 309
Weight of equity = 0.31067 or 31.067% or 96/309
Western Company is preparing a cash budget for June. The company has $11,800 cash at the beginning of June and anticipates $30,200 in cash receipts and $34,900 in cash disbursements during June. Western Company has an agreement with its bank to maintain a minimum cash balance of $10,000. As of May 31, the company owes $15,000 to the bank. To maintain the $10,000 required balance, during June the company must:
Answer:
See below
Explanation:
With regards to the above, we need to compute first the preliminary balance
Preliminary balance = $11,800 + $30,200 - $34,900 = $7,100
Then compute the amount to borrow
Amount to borrow = Minimum cash balance - Preliminary balance
= $10,000 - $7,100
= $2,900
Therefore, to maintain the $10,000 required balance, the company must borrow $2,900 during June.
the meaning of socio economic issues
Answer:
Socio-economic issues are factors that have negative influence on an individuals' economic activity including: lack of education, cultural and religious discrimination, overpopulation, unemployment and corruption.
Transformational leaders enhance performance of employees by ________. A. focusing on short-term goals for employees B. restricting creativity among employees C. establishing goals, roles, and requirements D. instilling pride in employees E. abdicating all responsibility to employees
Answer:
D. instilling pride in employees
Explanation:
Transformational leadership is a leadership style where there is a leader capable of motivating and encouraging each employee to develop their skills and thus become more productive and confident in their work. The transformational leader is the one who inspires through his personal example, he is the one who is always willing to help and collaborate with the success of each individual in a team.
Therefore, this is a very positive leadership style for organizations, as the leader is the maximum figure capable of inspiring, motivating and contributing to the creation of an organizational culture focused on creativity, collaboration, valuing work and productivity.
Sales made on account are recorded as ____ to the sales account.
A)orders
B)debits
C)payments
D)credits
Answer:
I have a strong feeling it has to be credit
Concord Inc. had beginning inventory of $11,900 at cost and $21,000 at retail. Net purchases were $140,679 at cost and $183,000 at retail. Net markups were $10,900, net markdowns were $7,500, and sales revenue was $132,700. Compute ending inventory at cost using the conventional retail method. (Round ratios for computational purposes to 0 decimal places, e.g. 78% and final answer to 0 decimal places, e.g. 28,987.)
Answer:
See
Explanation:
Retail inventory - Conventional method
Cost Retail
Beginning inventory 11,900 21,000
Purchases 140,679 183,000
Add: Mark up --- 10,900
Current year addition 140,679 193,900
Goods available for sale 152,579 214,900
Less: Mark down ----- 7,500
Sales ----- 132,700
Ending inventory retail ----- 74,700
Ratio of goods available for sale (152,579/214,900) 71%
Ending inventory 53,037
The calculation of the payback period for an investment when net cash flow is even (equal) is:
Answer:cost of investment/annual net cash flow
Explanation:
The Payback period states the period within which the investment funds are recoupened. The even net cash flow shows that the cash inflows are positive than cash outflows.
The computation of the payback period when the company experiences an even net cash flow would be:
[tex]P=\frac{I}{n}[/tex]
Here, P is the payback period, I is the initial investment and n is net cash flow in each period. Therefore, the payback period will be equal to the initial investment divided by net cash flow per period.
Learn more about the payback period here:
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Think of a business professional you admire. Using an example of a time when this person displayed integrity in a difficult situation, discuss how their business actions demonstrated their values.
Answer:
A business professional that I think of is a family friend is the majority owner of an Architectural Millwork company and a time when they showed great integrity in a difficult situation was when a former employee was suing them for unemployment. They conducted themselves with total maturity and professionalism and they were completely honest the entire time. These business actions demonstrated that honesty is a key value for them in running their company and dealing with legality issues. This is a time when a business professional showed integrity during a difficult in their companies timeline.
Explanation:
Answer:
Amira, a sales rep for a software company, was asked by a potential customer whether the company’s technology could perform a specific function critical to his business needs. Amira wasn’t certain the software could handle his needs, so she told him she would need to get back to him. Rather than provide potential misinformation just to make the sale, Amira checked with the development team first. After determining the product could perform the requested function, she let her customer know. Not only did Amira earn the sale, but she earned trust and respect from her client, too.
Explanation:
In a workplace setting, acting with integrity often means demonstrating your core values in all efforts. Here are a few behaviors that show integrity:
Being dependable and following through on commitments
Being open and honest when communicating with others
Holding yourself accountable and owning up to your shortcomings
It’s important that employees exercise integrity regardless of their department or career level. Integrity is critical, however, in leadership positions where people have the opportunity to set examples for others. By incorporating strong values into your behavior, you can help encourage other employees to do the same.
How to display integrity in the workplace
Whether you’re working in a small business or a large corporation, your commitment to integrity will impact the workplace. Acting with integrity not only helps show employers you are capable of handling responsibilities that can advance your career, but it also helps foster a positive company culture.
Actions to demonstrate integrity and impact your workplace
1. Show up ready to work
2. Set a positive example
3. Be respectful during the conflict
4. Practice accountability
5. Follow and enforce company policies
6. Improve your work ethic
7. Respect property
Assume that Jones Co. will need to purchase 100,000 Singapore dollars (S$) in 180 days. Today's spot rate of the S$ is $.50, and the 180-day forward rate is $.53. A call option on S$ exists, with an exercise price of $.52, a premium of $.02, and a 180-day expiration date. A put option on S$ exists, with an exercise price of $.51, a premium of $.02, and a 180-day expiration date. Jones has developed the following probability distribution for the spot rate in 180 days:
Possible Spot Rate in 90 Days Probability
$.48 10%
$.53 60%
$.55 30%
The probability that the forward hedge will result in a higher payment than the options hedge is ____
Answer:
10%
Explanation:
Based on the information given we were told that the Possible Spot Rate in 90 Days is $.48 while the Probability is 10% which means that the Probability that call option won't be exercised is 10% which will inturn enables Jones to pay the amount of $48,000($.48*$100,000) reason been that it is much lower than the amount of $53,000($.53*$100,000) that was paid been with the forward hedge.
Therefore The probability that the forward hedge will result in a higher payment than the options hedge is 10%
Please help soon! Click this link to view O*NET’s Skills section for Chefs and Head Cooks.
Note that common skills are listed toward the top, and less common skills are listed toward the bottom.
According to O*NET, what are common skills needed by Chefs and Head Cooks? Select three options.
technology design
monitoring
management of personnel resources
programming
time management
installation
Answer: monitoring, management of personal resources, time management
Explanation:
Answer:
monitoring, management of personnel resources, critical thinking, and time management
Explanation:
EDGE 2021
Kauffman Market has a gross profit percentage of 40%. It is expecting an additional $3,000 in revenues over the upcoming 3-day holiday weekend. The manager would like 3 additional staff members assisting customers during this busy time. The additional staff members will each work one 6-hour shift per day and earn $12 per hour. Would it be profitable for Kauffman Market to add the extra staff members
Answer:
$552
Explanation:
The computation is shown below:
But before that following calculation need to be done
Additional profit is
= $3,000 × 40%
= $1,200
Additional labor cost is
= (3 days × 3 employees × 6 hours per day × 12 per hour )
= $648
As we can see that the company profit would be increase by
= $1,200 - $648
= $552
what are the financial resources of netflix
Netflix Inc. (NFLX) is a media company that offers consumers the ability to buy movie and TV entertainment services. Though the company has since adapted to a largely subscription-based model allowing customers to watch streaming television and movies online, Netflix still offers its original DVD service. Since the fourth quarter 2019, Netflix operates as a single business segment, no longer reporting across domestic streaming, international streaming, and domestic DVD segments.1 In recent years, competition in the streaming media business has grown fierce, with companies including The Walt Disney Co. (DIS), Amazon.com Inc. (AMZN), and Apple Inc. (AAPL) launching services to rival Netflix.on:
Suppose the marginal cost curve in the short run first decreases and then increases. If marginal cost is decreasing, _____ must be _____ and _____ must be _____.
Answer: D. marginal product; increasing; average variable cost; decreasing
Explanation:
The Marginal product curve is hump-shaped and the marginal cost curve is U-shaped because these two move in opposite directions to each other.
If the marginal cost is decreasing therefore, the marginal product must be increasing. If the marginal cost is decreasing and the marginal product is increasing, average variable cost will have to fall because every additional unit produced incurs less cost so the average has to fall as well.
The End Co issued preferred stock for proceeds of $19,000 during 2014. The company paid dividends of $3,500 on the preferred stock. The company issued a long-term note payable for $75,000 in exchange for a building during the year and bought $16,000 of new equipment. The company also purchased treasury stock for $5,000. The financing section of the statement of cash flows will report net cash inflows of
Answer:
The financing section of the statement of cash flows will report net cash inflows of $10,500
Explanation:
The financing section of the statement of cash flows shows results of cash resulting from capital invested by owners, debt issued and repayments to capital and debt.
Cash Flow from Financing Activities
Preferred Stock Issued $19,000
Dividends Paid ($3,500)
Treasury Stock Purchased ($5,000)
Net Cash Provided by Financing Activities $10,500
Bluefield Corp. has two product lines, A and B. Bluefield has identified the following information about its overhead and potential cost drivers: Total overhead$69,300 Cost drivers Number of labor hours1,900 Number of machine hours45,000 Required: 1. Suppose Bluefield Corp. uses a traditional costing system with number of labor hours as the cost driver. Determine the amount of overhead assigned to each product line if Product A requires 76 percent of the labor hours and Product B requires 24 percent. 2. Suppose Bluefield uses a traditional costing system with machine hours as the cost driver. Determine the amount of overhead assigned to each product line if Product A consumes 17,700 machine hours and Product B consumes 27,300.
Answer:
Overhead assigned to product labour hours
Product A = $36.5 per hour × 76%× 1900= 52,706.0
Product B = $36.5 per hour × 24%× 1900= 16,644.0
Overhead assigned to product using machine hours
Product A = $1.54 × 17,700= $27,258
Product B = $1.54 × 27,300 =$42,042
Explanation:
Under the traditional absorption costing system, overhead is assigned to units produced using the direct labour hours or machine hours basis.
Overhead absorption rate = Budgeted overhead for the period/Budgeted labour hours
OAR = $69,300 /1,900 hours
= $36.5 per hour
Overhead assigned to product
Product A = $36.5 per hour × 76%× 1900= 52,706.0
Product B = $36.5 per hour × 24%× 1900= 16,644.0
Overhead absorption rate = Budgeted overhead for the period/Budgeted machine hours
OAR = $69,300 /45,000 hours= $1.54 per hour
Overhead assigned to product
Product A = $1.54 × 17,700= $27,258
Product B = $1.54 × 27,300 =$42,042
On March 1, LGE asks to extend its past-due $6,000 account payable to Tyson. Tyson agrees to accept $1,400 cash and a 180-day, 8%, $4,600 note payable to replace the account payable. (Use 360 days a year.)(1) Prepare the March 1 entry for LGE.(2) Prepare the September 27 entry for LGE when it pays the note and interest to Tyson.
Answer: See explanation
Explanation:
1. Prepare the March 1 entry for LGE.
Debit: Account payable - Tyson = $6000
Credit: Cash = $1400
Credit: Note payable = $4600
.(2) Prepare the September 27 entry for LGE when it pays the note and interest to Tyson.
Debit: Notes Payable = $4600
Debit: Interest expense = ($4600 × 8/100 × 180/360) = $184
Credit: Cash = $4784
he following information pertains to the January operating budget for Casey Corporation. • Budgeted sales for January $207,000 and February $100,000. • Collections for sales are 60% in the month of sale and 40% the next month. • Gross margin is 35% of sales. • Administrative costs are $10,000 each month. • Beginning accounts receivable is $29,000. • Beginning inventory is $16,000. • Beginning accounts payable is $67,000. (All from inventory purchases.) • Purchases are paid in full the following month. • Desired ending inventory is 30% of next month's cost of goods sold (COGS). At the end of January, budgeted accounts receivable from January sales is ________.
Answer:
the budgeted account receivable is $82,800
Explanation:
The computation of the budgeted account receivable is shown below:
= Budgeted sales × next month sales collections percentage
= $207,000 × 40%
= $82,800
hence, the budgeted account receivable is $82,800'
We simply multiplied the budgeted sales with the next month collection sales percentage so that the budgeted account receivable could come
Families of goods or services having similar characteristics or methods of creation are called__________.
Answer:
Strategic business units
Explanation:
Answer:
Families of goods or services having similar characteristics or methods of creation are called__________ strategic business units.
why does the government spend less on defense and not more?write two reasons
Answer:When the federal government spends more money than it receives in taxes in a ... spending over time in nominal dollars is misleading because it does not take ... defense spending as a share of GDP has generally declined since the 1960s, ... Healthcare expenditures include both payments for senior citizens (Medicare), ...
Explanation:
On January 1, 20X7, Yarrow Corporation had 1,000,000 shares of common stock outstanding. On March 1, the corporation issued 150,000 new shares to raise additional capital. On July 1, the corporation declared and issued a 2-for-1 stock split. On October 1, the corporation purchased on the market 600,000 of its own outstanding shares and retired them.
Compute the weighted average number of shares to be used in computing earnings per share for 2021.
Increase Months
(Decrease) Outstanding Outstanding Share Months
Answer:
Yarrow Corporation
The weighted average number of shares to be used in computing earnings per share for 2021 is:
= 2,125,000 shares.
Explanation:
a) Data and Calculations:
Weighted-Average Number of Shares
Date Outstanding Shares Weight Weighted Average
January 1, 1,000,000 12/12 1,000,000
March 1 Issue 150,000 10/12 125,000
July 1 2-for-1 2,300,000 6/12 1,150,000
October 1 Treasury (600,000) 3/12 (150,000)
Total number 2,850,000 2,125,000
Landing Service is a lawn furniture company that has been around for many years. It is known for its ability to produce furniture more efficiently than any other company in the nation. In truth, no other companies in any other nation come close. Landing Service has shipped many of its products internationally. In fact, 80 percent of its profits come from international sales. However, the Italian government has imposed a tax on imported furniture items to protect local companies. The Brazilian government, on the other hand, has imposed taxes on Landing Service products due to the government wanting a piece of the pie.
Landing Service initially thought that these taxes were unfair because it was being singled out. However, after Landing Service contacted the organization that had the power to mediate this situation, the furniture company realized that the taxation it was subjected to was legal and that there was nothing it could do about it.
Refer to Landing Service. Because the company is known for its ability to produce lawn furniture more efficiently than any other company in the world, the company must have a(n) ____ advantage.
a. total
b. relative
c. comparative
d. proportional
e. absolute
Refer to Landing Service. What type of tax has the Brazilian government imposed on the company?
a. Import duty
b. Embargo
c. Revenue tariff
d. Protective tariff
e. Nontariff barrier
Answer:
Landing Service
1. Refer to Landing Service. Because the company is known for its ability to produce lawn furniture more efficiently than any other company in the world, the company must have a(n) ____ advantage.
e. absolute
2. Refer to Landing Service. What type of tax has the Brazilian government imposed on the company?
a. Import duty
Explanation:
Landing Service enjoys absolute advantage with its ability to produce furniture more efficiently than any other company in the world. It implies that Landing Service can produce furniture with lesser input resources than other furniture companies in the world.
Import duty, in this scenario, refers to the tax imposed by the Brazilian government on Landing Service's furniture. This tax increases the price of the furniture for the Brazilian importers and consumers.
23) Sarah is trying to decide which one of two job offers she will accept. Several items are presented below: Job Offer A Job Offer B (1) Base salary $ 50,000 $ 50,000 (2) Overtime compensation Comp. time Hourly rate (3) Moving allowance $ 3,000 $ 3,000 (4) Signing bonus $ 2,000 $ 0 (5) Job search costs incurred $ 300 $ 500 Select the items that are irrelevant to Sarah's decision. A. (1), (3), (5) B. (2), (4) C. (1), (3) D. (2), (3), (4)
Answer:
A. (1), (3), (5)
Explanation:
When deciding on whether the items presented in the Job Offer are relevant or irrelevant, Sarah would need to evaluate and compare between the both Offers.
Base Salary
The base salary offered in both the Job Offers are same. Therefore, this item is irrelevant. Since they both are same it won't matter whichever she selects.
Overtime Compensation
This is different in both the Job Offers. Comp. Time is basically where employers give their employees paid time off in lieu of the overtime they have worked. While in the case of hourly rate, the employees receive additional payment for overtime work. Sarah would have to choose which option is more preferred for her whether extra time or additional payment. This item is therefore relevant.
Moving Allowance
This allowance is equal in each job offers. So, she would receive it in any offer she selects. This item is also irrelevant when making decision on the Job Offer.
Signing Bonus
The signing bonus has been offered in only one of the Job Offers for $2,000. Sarah would need to decide if she would need this bonus or could she forgo the same. This item is relevant.
Job Search Cost
This is basically sunk cost which is not recovered. Therefore, it is irrelevant when making the decision for the Job Offer.
Hence, the base salary, moving allowance and job search cost are irrelevant for Sarah when making decision for the Job offer.
Answer:
its b llolł
Explanation:
what is large office
Answer:
Large office is big organisations with many clerical workers.
I hope it will help you ((:
Drew Chow has an annual salary of $110,250. He is married with no dependents. The married exemption for his state is $4,000. He pays $2.656.25 in state income taxes. What is the state income tax rate?
Answer: 2.5%
Explanation:
Drew salary is $110,250 and he gets a married exception of $4,000.
This reduces the taxable income to:
= 110,250 - 4,000
= $106,250
He pays $2,656.25 in taxes on that taxable income so the income tax rate can be found as:
106,250 * tax rate = 2,656.25
Tax rate = 2,656.25 / 106,250
= 2.5%
Plum Corporation will begin operations on January 1. Earnings for the next five years are projected to be relatively stable at about $80,000 per year. The shareholders of Plum are in the 33% tax bracket. With the given scenarios, pick the best choice and explain why.
A. Assume that Plum will reinvest its after-tax earnings in the growth of the company, should Plum Corp operate as a C Corporation or an S Corporation?
B. Assume that Plum will distribute its after-tax earnings each year to its shareholders. Should Plum operate as a C corporation or an S Corporation?
Answer:
Plum Corporation
The best choice is:
B. Assume that Plum will distribute its after-tax earnings each year to its shareholders. Should Plum operate as a C corporation or an S Corporation?
Explanation:
a) Tax is the greatest difference existing between a C corporation and an S corporation. With a C corporation, the earnings are taxed twice. When the C corporation earns income, it is taxed as a corporation. When it distributes the after-tax earnings, the owners are taxed again in income tax. This does not happen with an S corporation. The S corporation does not pay corporate tax, instead, its owners pay their individual income taxes because the corporation's incomes are passed through the members.
