Carmen Owns 10% of the Stock of Fitness Design Corporation

question 76

Multiple Choice

Carmen owns 10% of the stock of Fitness Design Corporation, and is its manager. Fitness Design reports taxable income of $70,000 and pays $60,000 in dividends to shareholders before considering payments to Carmen. Carmen receives a $50,000 salary. What is Carmen's income from Fitness Design?

• A)$6,000
• B)$7,000
• C)$50,000
• D)$56,000
• E)$57,000

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Definitions:

Cost

The amount of money or resources expended to acquire an asset, produce goods, or offer a service.

Intangible Asset

This is an asset that lacks physical substance, such as patents, trademarks, and goodwill, yet offers economic value to its owner.

Physical Substance

Refers to tangible assets that have a concrete form and can be touched, as opposed to intangible assets.

Rights

Entitlements or privileges granted, typically to shareholders, such as the right to buy additional shares in certain circumstances.