Which of the Following Statements Regarding the Accumulated Earnings Tax

question 106

Multiple Choice

Which of the following statements regarding the accumulated earnings tax is correct in 2010?

• A)If Blue,Inc.'s accumulated taxable income for 2010 is $180,000,the calculated accumulated earnings tax liability would be $53,450 [($50,000 ´ 15%)+ ($25,000 ´ 25%)+ ($25,000 ´ 34%)+ ($80,000 ´ 39%)].
• B)Blue,Inc. ,calculates accumulated taxable income for 2010 of $100,000.Therefore,it should increase the amount paid to the IRS for 2010 by $15,000 ($100,000 ´ 15%).
• C)The accumulated earnings tax applies to C corporations,but applies to S corporations at only the shareholder level.
• D)The tax rate for the accumulated earnings tax of 35% is the same as the highest tax bracket for the corporate taxpayer.
• E)None of the above.

---

Definitions:

Direct Method

A cash flow statement preparation method that lists major cash receipts and payments during the period, directly showing sources and uses of cash.

Net Income

A calculation that determines a company's profit by deducting total expenses from total revenues, serving as an essential indicator of financial health.

Investing Activities

Part of a company's cash flow statement that reports the purchase and sale of long-term investments and property, plant, and equipment.

Financing Activities

Transactions involving external sources of funding for a company, including debt, equity, and dividend payments.