Ivory Corporation, a Calendar Year, Accrual Method C Corporation, Has

question 34

Multiple Choice

Ivory Corporation, a calendar year, accrual method C corporation, has two cash method, calendar year shareholders who are unrelated to each other. Craig owns 35% of the stock, and Oscar owns the remaining 65%. During 2018, Ivory paid a salary of $100,000 to each shareholder. On December 31, 2018, Ivory accrued a bonus of $25,000 to each shareholder. Assuming that the bonuses are paid to the shareholders on February 1, 2019, compute Ivory Corporation's 2018 deduction for the above amounts.

• A) $250,000
• B) $225,000
• C) $200,000
• D) $125,000
• E) None of above

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Definitions:

Margin of Safety Percentage

The ratio that indicates how much sales can decline before a business reaches its break-even point.

Total Sales

The aggregate revenue generated from all goods and services sold by a company within a specific period.

Contribution Margin

The amount by which sales revenue exceeds variable costs of production, used to cover fixed costs and generate profit.

Net Income

The total earnings of a company after subtracting all expenses, including taxes and operating costs, indicative of its profitability.