Red Corporation,which Owns Stock in Blue Corporation,had Net Operating Income

question 88

Multiple Choice

Red Corporation,which owns stock in Blue Corporation,had net operating income of $400,000 for the year.Blue pays Red a dividend of $60,000.Red takes a dividends received deduction of $48,000.Which of the following statements is correct?

• A)Red owns less than 20% of Blue Corporation.
• B)Red owns 20% or more, but less than 80% of Blue Corporation.
• C)Red owns 80% of Blue Corporation.
• D)Red owns 80% or more of Blue Corporation.
• E)None of the above.

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Definitions:

Net Float

The difference between checks written and deposited but not yet cleared, affecting a company's available cash balance.

Deposited

The act of placing money into a financial account or institution for safekeeping or to earn interest.

Cheques

Non-cash forms of payment that order a bank to pay a specific amount of money from a person's account to another individual or company's account.

Lockbox System

A service offered by banks to companies for the collection of payments from customers, utilizing a special post office box to speed up the deposit of checks.