S Corporation Shareholders Who Own More Than 2% of the Outstanding

question 914

Multiple Choice

S corporation shareholders who own more than 2% of the outstanding stock are eligible for which of the following tax- free benefits?

• A) exclusion for cafeteria plan benefits
• B) exclusion from income for premiums paid for accident and health and medical reimbursement plans
• C) group term life insurance exclusion under Sec. 79 for premiums paid for up to $50,000 coverage
• D) None of the above.

Identify the methods of accounting for stock investments and their impact on financial statements.

Understand the treatment of dividends and interest revenue in investment accounting.

Comprehend the criteria and rationale for using different accounting methods for investments.

Recognize the journal entry recording of bond and stock investments, including the handling of accrued interest and dividends.

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Definitions:

Equity Method

An accounting technique used to record investments in other companies where the investor has significant influence but does not fully control the company, typically 20%-50% ownership.

Proportionate Share

An individual's or entity's part or share of something in relation to the whole, usually expressed as a percentage.

Held-to-maturity

Held-to-maturity refers to an investment strategy where the investor intends to hold a financial asset until its maturity date.