On December 31,2015,Flamingo,Inc

question 25

True/False

On December 31,2015,Flamingo,Inc. ,a calendar year,accrual method C corporation,accrues a bonus of $50,000 to its president (a cash basis taxpayer),who owns 75% of the corporation's outstanding stock.The $50,000 bonus is paid to the president on February 2,2016.For Flamingo's 2015 Form 1120,the $50,000 bonus will be a subtraction item on Schedule M-1.

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Definitions:

Duty of Compensation

An obligation to provide payment or restitution for loss, damage, or injury.

Incorporate

The process of legally forming a corporation under state law, effectively creating a distinct legal entity separate from its owners.

Agency by Agreement

A relationship formed through an express or implied contract where one party (the agent) is authorized to act on behalf of another (the principal).

Orally Agrees

To give consent or reach an agreement on something using spoken words rather than written.