Yates Corporation Elects S Status, Effective for Calendar Year 2016

question 132

Multiple Choice

Yates Corporation elects S status, effective for calendar year 2016. Yates' only asset has a basis of $50,200 and a fair market value of $110,400 as of January 1, 2016. The asset is sold at the end of 2016 for $130,800. What amount must Mark Farris, a 60% owner and subject to a 15% income tax rate, pay, if any?

• A)$5,358
• B)$12,642
• C)$21,070
• D)$35,718

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Definitions:

Analysis of Receivables

The examination of accounts receivable to determine the likelihood of collection and to identify any potential issues or risks.

Uncollectible Receivables

Money owed to a company by customers that is considered unlikely to be paid and often written off as bad debts.

Allowance for Doubtful Accounts

An estimation of the amount of accounts receivable which may not be collectible, creating a reserve for potential bad debts.

Accounts Written Off

This refers to the process where businesses remove uncollectible accounts receivable from their accounting records because payment is no longer expected.