Assume Taxable Income Is the Starting Point for Computing E

question 4

Multiple Choice

Assume taxable income is the starting point for computing E & P.During 2008, Moscow Corporation made a charitable contribu?tion of $100,000.Of this amount $10,000 could not be deducted in arriving at Moscow's taxable income for 2008 because of the 10% limitation.The $10,000 was carried over to 2009 and fully deducted in that year.

• A)The excess charitable contribution deduction reduces Moscow Corporation's E & P for 2009.
• B)The excess charitable contribution deduction of $10,000 would reduce Moscow Corporation's E & P in 2008.
• C)The excess charitable contribution increases Moscow Corporation's E & P for 2008.
• D)The excess charitable contribution deduction has no effect on Moscow Corporation's E & P in 2009.
• E)None of the above.

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Definitions:

Premium on Bonds Payable

The excess amount by which a bond is sold over its face value.

Financial Statements

Documents that provide an overview of a company's financial condition in both short and long term, including balance sheet, income statement, and cash flow statement.

Total Liabilities

The cumulative total of all liabilities or debts owed by a company, including bonds payable, accounts payable, salaries, loans, and any other monetary obligations.

Stockholders' Equity

The residual interest in the assets of an entity that remains after deducting its liabilities, often referred to as shareholders' equity or owners' equity.