Fireball Corporation Is an S Corporation

question 14

Multiple Choice

Fireball Corporation is an S corporation.Leyla owns all of the stock.During the current year,Fireball earned taxable income of $500,000 and paid a $300,000 distribution to Leyla.Which of the following statements is correct?

• A)Fireball will pay corporate income tax on its earnings,and Leyla will pay individual income tax on the distribution.
• B)Only Fireball will pay taxes.Leyla will not pay any taxes due to her holdings in Fireball.
• C)Fireball's income will flow through to Leyla's tax return,and she will pay the taxes on the $500,000 of corporate income.
• D)Fireball will not pay any taxes,but Leyla will pay taxes on the distribution received.

Identify and compute ratios for assessing a company's profitability, liquidity, and solvency.

Evaluate short-term credit risk and profitability using financial ratios.

Understand the concept and application of financial statement analysis for business decisions.

Recognize the tools and standards used for financial statement analysis including comparative statements and common-size analysis.

---

Definitions:

Consumer Confidence

A measure of the overall consumer optimism about the state of an economy, reflected through spending and saving behaviors.

Housing Bubble

A temporary condition characterized by an unusual increase in housing prices fueled by demand, speculation, and exuberant spending to the levels that income levels do not support.

Demand Curve

A graph showing the relationship between the price of a good and the quantity demanded by consumers, usually downward sloping to the right indicating inverse relationship between price and quantity demanded.

Normal Good

A good for which demand increases as the income of the consumer increases, and vice versa.