Sammy Buys a 20% Interest in Duvall Corporation Paying $100,000

question 47

Multiple Choice

Sammy buys a 20% interest in Duvall Corporation paying $100,000 cash on January 1,2015.During 2015,Duvall Corporation reports a loss of $60,000 and pays cash dividends to shareholders of $5,000.For 2016,Duvall Corporation has income of $200,000 and pays cash dividends of $40,000.If Duvall Company is organized as an S Corporation,Sammy's basis in the Duvall Corporation stock at the end of 2016 is:

• A)$88,000
• B)$89,000
• C)$100,000
• D)$119,000
• E)$128,000

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Definitions:

Periodic Inventory System

An inventory accounting system where updates to inventory levels are made at specific intervals, such as monthly or annually, rather than continuously.

Physical Count

A manual inventory verification process where actual items are counted to ensure accuracy of records.

Inventory System

A method for tracking the quantity, value, and location of a company's inventory, both current and sold.

FOB Destination

A shipping term indicating that the seller is responsible for the goods and transportation costs until the buyer receives the goods.