MWC Is a C Corporation That Uses the Accrual Method

question 25

Essay

MWC is a C corporation that uses the accrual method of accounting. MWC made an S election, effective January 1 of 2020. The following assets were owned by MWC on December 31, 2019.
What is MWC's net unrealized built-in gain when it converts to an S corporation on January 1, 2020?

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Definitions:

Net Capital Spending

This refers to the amount spent by a company on acquiring or maintaining fixed assets, such as equipment or buildings, after accounting for depreciation.

Average Tax Rate

The percentage of total income that is paid in taxes, calculated by dividing the total tax amount by the total income.

Capital Gains

The profit from the sale of an asset or investment when the selling price exceeds the purchase price.

Non-Eligible Dividends

Dividends that are paid out by a company from earnings that are not subject to the preferential tax treatment as eligible dividends in some jurisdictions.