Thu and Tuan Each Own One-Half of the Stock of Wren

question 43

Multiple Choice

Thu and Tuan each own one-half of the stock of Wren, Inc., a C corporation.Each shareholder holds a stock basis of $175,000.Wren has accumulated E & P of $300,000.Wren's taxable income for the current year is $100,000, and it distributes $75,000 to each shareholder.Thu's stock basis at the end of the year is:

• A)$0.
• B)$100,000.
• C)$150,000.
• D)$175,000.
• E)None of the above.

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Definitions:

Fixed Overhead Volume Variance

Fixed overhead volume variance is the difference between the budgeted and actual volume of production, multiplied by the fixed overhead rate, indicating efficiency in production volume.

Predetermined Fixed Overhead Rate

A rate used to allocate fixed overhead costs to produced goods, based on estimated costs and activity levels.

Denominator Activity

The level of activity used to allocate fixed costs in a costing system.

Standard Machine-Hours

A metric used to estimate the amount of machine time required for or used during production based on standard rates.