Mock Corporation Converts to S Corporation Status in 2013

question 105

Multiple Choice

Mock Corporation converts to S corporation status in 2013.Mock used the LIFO inventory method in 2012 and had a LIFO inventory of $435,000 (FIFO value of $550,000) on the date of the S election.How much tax must be added to Mock's 2012 corporate tax liability,assuming that Mock is subject to a 35% tax rate.

• A)$0.
• B)$10,062.50.
• C)$40,250.
• D)$115,000.
• E)Some other amount.

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Definitions:

Par Value

The face value of a bond or the stated value of a stock as specified by the issuing company.

Fair Value

The monetary return from an asset's sale or the expenditure for transferring a liability in an orderly market dialogue on the assigned valuation day.

Stock Issuance Costs

Expenses associated with the process of issuing new stocks in the market, such as legal fees, printing expenses, and commissions.

Financial Statements

Materials that present a snapshot of a business's financial health, detailing the balance sheet, income statement, and cash flow statement.