Arthur Is the Sole Shareholder of Purple, Inc

question 61

Multiple Choice

Arthur is the sole shareholder of Purple, Inc. Purple's taxable income before the payment of Arthur's salary is $300,000. Based on this information, Arthur has the corporation pay him a salary of $200,000 and a bonus of $100,000. A reasonable salary and bonus would be $175,000. Which of the following is correct?

• A)The taxable income of Purple, Inc., is $0 ($300,000 - $300,000 salary and bonus).
• B)The taxable income of Purple, Inc., is $100,000 ($300,000 - $200,000).
• C)Arthur has salary and bonus income of $300,000.
• D)Arthur has salary and bonus income of $175,000 and dividend income of $125,000.
• E)None of the above.

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Definitions:

Expenditures

The total amount of money spent by individuals, businesses, or governments on goods and services.

GDP

Gross Domestic Product, a measure of the economic performance of a country, calculated as the total value of all goods and services produced within the country in a specific time period.

Unfunded Promises

Commitments or obligations, especially by a government, for which no money has been set aside to fulfill them.

Economic Theory

A set of principles and frameworks that aim to explain and predict the behaviors of individuals, firms, and governments in an economy.