Although It Is a Small Company,Zorn Enterprises Owns a Large

question 224

Multiple Choice

Although it is a small company,Zorn Enterprises owns a large number of inexpensive rental housing units in Texas and Louisian A.Currently,the company is a chartered C-corporation,but the owners are interested in switching to an S corporation.After consulting a lawyer,they learned that Zorn Enterprises does not qualify to be designated as an S corporation.Which of the following characteristics of Zorn Enterprises would prevent it from becoming an S corporation?

• A)The firm has fewer than 75 stockholders.
• B)The firm is chartered in one state,but owns property in another.
• C)The firm has only one class of stock,all owned by U.S.citizens.
• D)The firm receives more than 70 percent of its income from rents and other passive sources.

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Definitions:

Further Processing Costs

Additional costs incurred when processing products beyond their initial production stage to enhance their value.

Selling Price

The amount a seller charges a buyer for a product or service, determined by various factors including cost, demand, and competition.

Variable Overhead Costs

Overhead costs that fluctuate with the level of production activity, such as utilities for the manufacturing plant.

Operating Capacity

The maximum output or productivity level that a company can achieve using its current resources under normal working conditions.