Waters Corporation Is an S Corporation with Two Equal Shareholders,Mia

question 53

Multiple Choice

Waters Corporation is an S corporation with two equal shareholders,Mia Jones and David Kerns.This year,Waters recorded the following items of income and expense: Waters distributed $25,000 to each of its shareholders during the year.Calculate the S corporation's ordinary (non-separately stated) income and indicate which items must be separately stated.

• A)Ordinary income,$126,000; long-term capital gain is separately stated.
• B)Ordinary income,$120,000; interest income and long-term capital gain are separately stated.
• C)Ordinary income,$136,000; nothing is separately stated.
• D)Ordinary income,$195,000; interest income,long-term capital gain,and salary costs are separately stated.

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Definitions:

Stockholders' Equity

The amount of capital given to a company by its shareholders plus its retained earnings.

Intangible Assets

Non-physical assets such as patents, trademarks, and copyrights that have value to a business.

Classified Balance Sheet

A balance sheet that organizes assets and liabilities into subcategories like current, long-term, property, plant, and equipment, to provide more detailed information.

Current Ratio

It's a financial ratio that calculates whether a corporation can cover its obligations that need to be paid within one year, by dividing the current assets by the current liabilities.