Amy Owns 20% of the Stock of Wren Corporation, Which

question 103

True/False

Amy owns 20% of the stock of Wren Corporation, which she acquired several years ago at a cost of $10,000. Amy is Vice-President of Wren and earns a salary of $80,000 annually. Last year, Wren Corporation was experiencing financial problems, and Amy loaned the corporation $25,000. In the current year, Wren becomes bankrupt, and both her stock investment and the loan become worthless. Amy has a nonbusiness bad debt deduction this year of $25,000.

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Definitions:

Capital Balances

Amounts reflected in a company's financial records that represent the owner's investment in the business.

Cash Equals

Refers to the value of assets within a company that are in liquid form and can be readily converted to cash.

Share Income

Income earned by shareholders from their investments in a company, often referred to as dividends.

Capital Balances

The amount of money that each partner in a partnership has contributed and retains in the business.