Explanation: Owners of Unincorporated Entities Can Be Either Individuals or Corporations.In

question 1

Multiple Choice

Explanation: Owners of unincorporated entities can be either individuals or corporations.In either case, the tax year-end of the entity must match the tax year-end of the owner.
Difficulty: 2 Medium
Topic: Entity Tax Characteristics
Learning Objective: 12-03 Identify fundamental differences in tax characteristics across entity types.
Bloom's: Remember
Accessibility: Keyboard Navigation; Screen Reader Compatible
AICPA/AACSB: BB Critical Thinking / Reflective Thinking
-Roberto and Reagan are both 25-percent owner/managers for Bright Light Inc.Roberto runs the retail store in Sacramento, CA, and Reagan runs the retail store in San Francisco, CA.Bright Light Inc.generated a $125,000 profit companywide made up of a $75,000 profit from the Sacramento store, a ($25,000) loss from the San Francisco store, and a combined $75,000 profit from the remaining stores.If Bright Light Inc.is an S corporation, how much income will be allocated to Roberto?

• A)$31,250
• B)$62,500
• C)$75,000
• D)$125,000

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Definitions:

Net Income

The remaining earnings of a company following the deduction of all expenses and taxes from its total revenue.

Cash Dividends

Payments made by a company to its shareholders from its profits or reserves, representing a share of the corporate earnings.

Financing Activities

Transactions and events that affect long-term liabilities and equity of a company, including issuing debt, repaying loans, and distributing dividends.

Fiscal Year

A one-year period used by governments and businesses for accounting and financial reporting, which may or may not align with the calendar year.