Supposethat at the Beginning of 2020 Jamaal's Basis in His

question 125

Multiple Choice

Supposethat at the beginning of 2020 Jamaal's basis in his S corporation stock was $27,000 and Jamaal has directly loaned the S corporation $10,000. During 2020, the S corporation reported an $80,000 ordinary business loss and no separately stated items. After any loss deductions this year, what is Jamaal's stock and debt basis at the end of the year if Jamaal is a 50percent shareholder of the S corporation?

• A)$27,000 stock basis; $10,000 debt basis
• B)$0 stock basis; $10,000 debt basis
• C)$67,000 stock basis; $10,000 debt basis
• D)($13,000)stock basis; $10,000 debt basis
• E)None of the choices are correct.

---

Definitions:

Acid-Test Ratio

A stringent indicator of a company's short-term liquidity, calculated by dividing liquid assets by current liabilities, excluding inventory from assets.

Financial Stability

The condition of having strong financial health, characterized by a solid balance sheet, manageable debt, and the capability to meet short and long-term obligations.

Operating Efficiency

A measure of how well a company utilizes its resources to generate profit without unnecessary waste.

Financial Ratios

Quantitative measures derived from a company's financial statements, used to evaluate its financial health, performance, and viability.