Adam Corporation Owns 1,000 Shares of Common Stock of Rosen,Inc

question 59

Multiple Choice

Adam Corporation owns 1,000 shares of common stock of Rosen,Inc. ,a large publicly traded company listed on a major stock exchange.If Rosen issues a 20 percent stock dividend when the par value is $10 per share and the market value is $70 per share,how much and what type of income should Adam report?

• A) $0
• B) $2,000 ordinary income
• C) $14,000 ordinary income
• D) $2,000 ordinary income and $12,000 extraordinary income

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Definitions:

Target Net Profit

The desired bottom-line profit that a company aims for after all expenses have been subtracted from revenue.

Safety Margin

The difference between your actual or projected sales and the sales level needed to break even.

Tax Rate

The percentage at which an individual or corporation is taxed by the government, which can vary based on income level, type of income, or legal entity type.

What-If Analysis

An analytical process used to evaluate the potential effects of different scenarios on project outcomes or business objectives.