To Qualify for Subchapter S Treatment Under the Internal Revenue

question 28

Multiple Choice

To qualify for Subchapter S treatment under the Internal Revenue Code, a domestic corporation must have .

• A) membership in an affiliated group of corporations
• B) more than 35 shareholders
• C) only one class of stock outstanding
• D) at least one nonresident alien shareholder

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Definitions:

Acid-Test Ratio

A liquidity ratio, also known as the quick ratio, that measures a company's ability to pay off its current liabilities with its quick assets (cash, marketable securities, and accounts receivable).

Stockholders' Equity

The remaining value of a corporation's assets once liabilities are subtracted, which signifies the share of ownership held by the shareholders.

Prepaid Expenses

Expenses paid for in advance and recorded as assets before they are used or consumed.

Acid-Test Ratio

The acid-test ratio, also known as the quick ratio, measures a company's ability to meet its short-term obligations with its most liquid assets, excluding inventory.