Emerald Corporation, a Calendar Year C Corporation, Was Formed and Began

question 56

Multiple Choice

Emerald Corporation, a calendar year C corporation, was formed and began operations on April 1, 2012. The following expenses were incurred during the first tax year (April 1 through December 31, 2012) of operations: Assuming a § 248 election, what is the Emerald's deduction for organizational expenditures for 2012?

• A)$0.
• B)$4,550.
• C)$5,000.
• D)$7,400.
• E)None of the above.

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Definitions:

Inventory Holding Period

Inventory holding period measures the average time a company holds inventory before selling it, reflecting the efficiency of inventory management and its impact on cash flow.

Payables Deferral Period

The average length of time between a firm’s purchase of materials and labor and the payment of cash for them. It is calculated by dividing accounts payable by credit purchases per day (cost of goods sold/365).

Line of Credit

A flexible loan arrangement with a financial institution that allows a borrower to draw upon funds up to a specified limit at their discretion.

Financial Strength

The ability of an entity to meet its financial obligations, often evaluated through metrics like liquidity ratios, solvency ratios, and profitability.