In 2014,Craig and Kathy Koehler Owned a Small Business Which

question 35

Multiple Choice

In 2014,Craig and Kathy Koehler owned a small business which was held as a proprietorship in Kathy's name.They were thinking of incorporating if that would lower their total tax liability.The Koehlers expected the company to earn $100,000 before taxes next year.They planned to take out salaries of $45,000,and to reinvest the rest in the business.Their personal deductions total $8,150 and they will file a joint return for their personal income.(1) What is their expected total tax liability as a proprietorship? (2) As a corporation?
(3) Based on current taxes,should they incorporate?

• A) $23,304.50;$14,675.00;Yes
• B) $14,675.00;$13,427.50;Yes
• C) $23,304.50;$13,427.50;Yes
• D) $15,212.50;$23,450.00;No
• E) $20,778.00;$23,450.00;No

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Definitions:

Bond Issue Costs

Expenses associated with the issuance of bonds, including legal fees, printing costs, and commissions, that are typically amortized over the life of the bonds.

Financial Statements

Documents that report on a company's financial performance, position, and cash flows, typically including the balance sheet, income statement, and cash flow statement.

Premium on Bonds Payable

The amount by which the selling price of a bond exceeds its par value or face value.

Discount on Bonds Payable

The difference between the face value of a bond and its selling price, when the bond is sold for less than its face value.