Which Transaction Affects the Other Adjustments Account on an S

question 23

Multiple Choice

Which transaction affects the Other Adjustments Account on an S corporation's Schedule M-2?

• A) Payroll penalty.
• B) Unreasonable compensation.
• C) Life insurance proceeds (nontaxable to the recipient S corporation).
• D) Taxable interest.

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Definitions:

Interest Per Month

The amount of interest charged or earned on an account or loan, calculated on a monthly basis.

Borrowing

The act of obtaining funds from another party with the promise to repay the principal amount along with interest.

Compounded Annually

When interest is compounded annually, it means the interest earned on an investment is added to the principal at the end of each year, with future interest calculations based on the new total.

Cash Flow Stream

A cash flow stream is a series of cash inflows and outflows over a period, often used in financial modeling to forecast or evaluate a project's viability.