Which of the Following Statements Is True Regarding Subchapter S

question 104

Multiple Choice

Which of the following statements is true regarding Subchapter S firms?

• A)These firms are liable to pay federal income taxes.
• B)These firms cannot have more than 100 shareholders.
• C)These firms need to pass-through at least half of their earnings to their shareholders.
• D)Income from these firms is tax-exempt for its shareholders.
• E)All of the options are true for Subchapter S firms.

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Definitions:

Excess Capacity

The available production capability that exceeds the current demand for products or services.

Variable Cost Method

An accounting technique that tracks production costs that vary with the level of output.

Markup Percentage

The percentage added to the cost of a product or service to determine its selling price.

Invested Assets

Assets in which funds have been placed with the expectation of generating income or profit.