Barnum and Bailey Incorporated Their Circus This Year and Elected

question 66

Multiple Choice

Barnum and Bailey incorporated their circus this year and elected to be treated as an S corporation.Barnum owns 60% of the corporation's stock while Bailey owns the remaining 40%.This year, the corporation had net income of $300,000 before the owners took any money out of the business (e.g., before salaries, dividend distributions, etc.) .Assuming the corporation paid Barnum a deductible salary of $100,000 for managing the business and made dividend distributions of $12,000 to Barnum and $8,000 to Bailey, what is the amount of taxable income to be reported by Barnum?

• A)$220,000
• B)$192,000
• C)$180,000
• D)$108,000
• E)None of the above

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Definitions:

Estimated Total

An approximation of the sum or magnitude of a particular set of values or items, projected from sample data or generated through analysis.

Unit Product Cost

The total cost (both variable and fixed) associated with producing one unit of a product.

Total Job Cost

The sum of all costs assigned to a specific job, including materials, labor, and overhead.

Predetermined Manufacturing Overhead

An estimated overhead cost calculated before the actual production starts, used in budgeting and setting product prices.