A Foreign Corporation Is Owned by Five Unrelated Individuals

question 51

Multiple Choice

A foreign corporation is owned by five unrelated individuals. John, Sam, and David are U.S. citizens who own 30%, 18% and 9%, respectively, of the foreign corporation's single class of stock. Alberto and Manuel are nonresident aliens who own 37% and 6%, respectively, of the foreign corporation's stock. Which of the following statements is true?

• A)There are three "U.S. shareholders" and the foreign corporation is a controlled foreign corporation (CFC).
• B)There are three "U.S. shareholders" and the foreign corporation is not a controlled foreign corporation (CFC).
• C)There are two "U.S. shareholders" and the foreign corporation is not a controlled foreign corporation (CFC).
• D)There are two "U.S. shareholders" and the foreign corporation is a controlled foreign corporation (CFC).

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Definitions:

Outstanding Accounts Receivable

The amount of money owed to a company by its customers for goods or services delivered but not yet paid for.

Allowance for Doubtful Accounts

A contra-asset account used to estimate the portion of accounts receivable that is expected to become uncollectible.

Percent of Sales Method

A forecasting technique used in financial planning to estimate certain balance sheet and income statement accounts based on projected sales growth.

Bad Debts

Amounts owed to a company that are not expected to be received, often due to customers being unable to pay.