Answer:
B) False: since it is still a closely held C corporation, it cannot reduce its ordinary income through passive losses. If it hadn't been a closely held C corporation then it could have made the deductions.
Explanation:
Passive losses are losses resulting from financial activities, i.e. investments in other corporations where the investor doesn't participate in.
Passive losses cannot offset ordinary income, they must be matched against passive gains only. If passive losses exceed passive gains, they can be carried forward without limitation.
The only exception applies to C corporations that are not;
- closely held corporations or
- personal service corporations.
Qualifying C corporations can actually deduct passive losses from certain ordinary income.
Closely held C Corporations are corporations where during the last 6 months, 50% or more of its stock is owned by 5 or fewer investors.
Cyclical unemployment: rises during a recession
<h3><u>What is Cyclical unemployment ?</u></h3>
- Cyclical tendencies in growth and output, as shown by the GDP, that take place throughout the economic cycle are what are meant by cyclical unemployment.
- Cyclical unemployment is defined by economists as the situation that arises when firms don't have enough demand for labor to hire all people who are searching for work at that particular stage of the business cycle.
- There may be a commensurate decrease in supply output to make up for a loss in demand for a good or service.
- To fulfill the lower norm of production volume, fewer workers are needed when supply levels are cut.
- The corporation will discharge any employees who are no longer required, which will result in their unemployment.
To learn more about Cyclical unemployment, refer to:
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Answer:
1. Once a month, the sales department sends sales invoices to the accounting department to be recorded.
⇒ documentation procedures
Unless all of the company's sales take place only once a month, sales should be recorded as soon as possible. Accounting records must be as precise and accurate as possible, and they must be processed on time. Stacking invoices makes no sense, since sales might be on cash or the collection period might be very short. Who holds the money until the sales records are made?
2. Leah Hutcherson orders merchandise for Rice Lake Company; she also receives merchandise and authorizes payment for merchandise.
⇒ segregation of duties
One single person cannot be responsible for the whole process, since this creates a huge opportunity for fraud. Imagine if the person in charge of the inventory is also in charge of making new purchases, paying for them and reporting ending inventory. No company would be able survive one year, while the person in charge would get rich.
3. Several clerks at Great Foods use the same cash register drawer
⇒ establishment of responsibility
If everyone is allowed to collect money, no one can be responsible for any loss.
Answer:
7.5 years
Explanation:
Payback is the period a project takes to recover its initial capital outflow.
The formula for calculating the payback period = Initial investments divide by net cash flow per period.
Payback Period = Initial Investments/ Net Cash Flow per Period
Payback period = $450,000/ $60,000
Payback period =7.5 years
