Identify Which of the Following Statements Is True

question 60

Multiple Choice

Identify which of the following statements is true.

• A)An S corporation should have a buy-sell agreement to guard itself against an ill-advised sale of its stock.
• B)The terms "small business corporation" and "S corporation" are synonymous.
• C)A regular corporation has common and preferred stock outstanding on January 1. On January 2, the preferred stock is canceled in a recapitalization, leaving only common stock outstanding. The corporation can make an S election for this tax year.
• D)All of the above are false.

---

Definitions:

Credit Sales

Sales in which the customer is allowed to pay at a later time, typically generating accounts receivable on the balance sheet.

COGS

Cost of Goods Sold; the direct costs attributable to the production of the goods sold by a company, including materials and labor.

Payables Turnover Rate

A financial ratio indicating how efficiently a company pays its suppliers, calculated by dividing total purchases by average accounts payable.

Accounts Payable Balance

The total amount of money that a company owes to its suppliers or creditors for items or services purchased on credit.