Mock Corporation Converts to S Corporation Status in 2015

question 20

Multiple Choice

Mock Corporation converts to S corporation status in 2015.Mock used the LIFO inventory method in 2014 and had a LIFO inventory of $435,000 (FIFO value of $550,000) on the date of the S election.How much tax must be added to Mock's 2014 corporate tax liability,assuming that Mock is subject to a 35% tax rate.

• A)$0
• B)$10,062.50
• C)$40,250
• D)$115,000
• E)Some other amount

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Definitions:

Sole Proprietorships

A type of enterprise that is owned and operated by a single individual, with no legal distinction between the owner and the business.

Partnerships

A formally approved business entity where several individuals come together to share in the management and the financial gains.

Corporations

Legal entities established by shareholders who invest money or assets for a common purpose and enjoy limited liability protection.

Overhead

refers to the ongoing business expenses not directly attributed to creating a product or service, including rent, utilities, and administrative costs.