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.

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Definitions:

Financial Statements

A set of formal documents tracking the financial activities, status, and cash flows of a business, providing insight into its financial health over a specified period.

Accrual

An accounting method where revenue and expenses are recorded when they are earned or incurred, regardless of when the cash is actually received or paid.

Interest Expense

The amount an entity pays for the use of borrowed funds throughout a certain duration.

Net Cash Flow

The amount of cash generated or used by a company in a given period, calculated as the sum of cash flow from operating, investing, and financing activities.