Canary Corporation,an Accrual Method C Corporation,uses the Calendar Year for Tax

question 100

Essay

Canary Corporation,an accrual method C corporation,uses the calendar year for tax purposes.Leticia,a cash method taxpayer,is both a shareholder of Canary and the corporation's CFO.On December 31,2015,Canary has accrued a $75,000 bonus to Leticia.Describe the tax consequences of the bonus to Canary and to Leticia under the following independent situations.
a.​
Leticia owns 35% of Canary Corporation's stock and the corporation pays the bonus to Leticia on February 3,2016.
b.​
Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on April 4,2016.
c.​
Leticia owns 75% of Canary Corporation's stock and the corporation pays the bonus to Leticia on February 3,2016.

Recognize the significance of the time period assumption in accounting.

Understand the treatment and impact of prepaid expenses and unearned revenue on financial statements.

Calculate financial statement impacts of adjustments, including depreciation and adjustments for prepaid and accrued items.

Prepare adjusting journal entries for a variety of transactions.

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Definitions:

Canadians

Citizens or nationals of Canada, a country known for its diverse culture, natural beauty, and commitment to social welfare.

Equal

Pertaining to being the same in quantity, size, degree, value, or status.

Intergenerational Mobility

The change in social status or class from one generation to the next within a family or across different families.

Intragenerational Mobility

Status movement throughout one’s lifetime.