Which of the Following Is Least Likely to Result in a Constructive

question 82

Multiple Choice

Which of the following is least likely to result in a constructive dividend?

• A)an unreasonable salary paid to a shareholder
• B)a sale of a corporation's asset to a shareholder at fair market value
• C)a payment by a corporation of a shareholder's debts
• D)a payment by a corporation of a shareholder's personal expenses

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Definitions:

Merchandise Sold

The goods that a company has sold to its customers; relates to revenue generation in businesses dealing with physical products.

Notes Payable

Notes Payable are written agreements in which one party promises to pay another party a specified sum of money, either on demand or at a fixed or determinable future time.

Current Portion

Refers to the portion of long-term debt that is due to be paid within the next year.

Retained Earnings

The portion of net income that is not distributed to shareholders as dividends but is kept by the company for reinvestment.