You Are Given the Following Facts About a Solely Owned

question 96

Multiple Choice

You are given the following facts about a solely owned S corporation. What is the shareholder's ending stock basis? $$\begin{array}{l}\begin{array} { l r } \text { Increase in AAA } & \$ 31,000 \\\text { Increase in OAA } & 6,300 \\\text { Payroll tax penalty } & 2,140 \\\text { Beginning stock basis } & 39,800 \\\text { Stock purchases } & 22,000 \\\text { Tax-exempt life insurance proceeds } & 4,800 \\\text { Life insurance premiums paid } & 2,700\end{array}\\\text { (nondeductible) }\end{array}$$

• A) $61,800
• B) $68,100
• C) $99,100
• D) $100,100

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Definitions:

Sunk Cost

An expense that has been incurred and cannot be recouped.

Manufacturing Costs

The total expense involved in the manufacture of a product, including direct labor, direct materials, and manufacturing overhead.

Scrap Metal

Waste metal material that can be recycled or reused, often collected and sold by businesses or individuals.

Differential Analysis

The process of comparing the costs and benefits of alternative business decisions, focusing on differences in outcomes.