Nancy Smith Is the Sole Shareholder and Employee of White

question 34

Multiple Choice

Nancy Smith is the sole shareholder and employee of White Corporation,a C corporation that is engaged exclusively in accounting services.During the current year,White has operating income of $320,000 and operating expenses (excluding salary) of $150,000.Further,White Corporation pays Nancy a salary of $100,000.The salary is reasonable in amount and Nancy is in the 33% marginal tax bracket irrespective of any income from White.Assuming that White Corporation distributes all after-tax income as dividends,how much total combined income tax do White and Nancy pay in the current year? (Ignore any employment tax considerations.)

• A)$56,125
• B)$64,325
• C)$67,625
• D)$84,000
• E)None of the above

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Definitions:

Equilibrium Quantity

The quantity of goods or services supplied that is exactly equal to the quantity demanded at the market equilibrium price.

Supply Increases

A situation where the quantity of a good or service that producers are willing to sell at a certain price rises.

Price of Wheat

The cost at which wheat is sold in the market, which can vary based on factors like quality, demand, and supply conditions.

Production Costs

The total expense incurred in the manufacturing of a product or the provisioning of a service, including raw materials, labor, and overhead expenses.