Mock Corporation Converts to S Corporation Status in 2012

question 31

Multiple Choice

Mock Corporation converts to S corporation status in 2012.Mock used the LIFO inventory method in 2011 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 the 2011 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.

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Definitions:

De Jure Corporation

a corporation that is legally established and operating in accordance with the law.

Common Stock

Corporate stock that does not convey any preference to its holders.

Preferred Stock

Stock that conveys preferences to its holder with respect to assets and dividends.

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