MWC Is a C Corporation That Uses the Accrual Method

question 75

Essay

MWC is a C corporation that uses the accrual method of accounting. MWC made an S election, effective January, 1 of 2016. The following assets were owned by MWC on December 31, 2015. $$\begin{array} { | l | r | } \hline \text { Description } & \text { Amount } \\\hline \text { Consulting revenue } & \$ 99,000 \\\hline \text { Salary to owners } & ( 40,000 ) \\\hline \text { Employee wages } & ( 30,000 ) \\\hline \text { Depreciation expense } & ( 5,000 ) \\\hline \text { Municipal bond interest } & 6,000 \\\hline \text { Interest income } & 42,000 \\\hline \text { Dividend income } & 25,000 \\\hline \text { Overall net income } & \$ 97,000 \\\hline\end{array}$$ What is MWC's net unrealized built-in gain when it converts to an S corporation on January 1, 2016?

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Definitions:

Period

In finance, it refers to the specific duration of time during which certain transactions or processes are evaluated or financial statements are prepared.

Overhead

The ongoing business expenses not directly attributed to creating a product or service, including rent, utilities, and administrative costs.

Labour Hours

The total number of hours worked by employees within a specific period, often used as a measure of labor productivity.

Department C

A categorization or specific division within a company, organization, or institution, designated with "C".