Waters Corporation Is an S Corporation with Two Equal Shareholders

question 36

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:

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