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Zanzabum
3 years ago
11

At the beginning of the year, Oak Corp. (an S corporation) had $50,000 in its AAA, $30,000 of earnings and profits from prior C

corporation years. During the year, Oak earned $25,000 of ordinary income and paid $100,000 in distributions to its shareholders. Assume that Ethan owns 25% of Oak Corp. his basis in Oak Corp. stock at the beginning of the year is $5,000, and his share of the distribution was $25,000. How much income does Ethan recognize this year from these transactions?
Business
1 answer:
Hunter-Best [27]3 years ago
3 0

Answer:

$20,000

Explanation:

Calculation to determine How much income does Ethan recognize this year from these transactions

First step is to calculate the share of ordinary income Amount

Share of ordinary income amount=$25,000 × 25%

Share of ordinary income amount=$6,250

Second step is to calculate AAA distribution

AAA distribution=[$50,000 + $25,000] × 25%]-[$30,000-($50,000 + $25,000 × 25%)]-

AAA distribution =$18,750-$11,250

AAA distribution=$7,500

Third step is to calculate the distribution treated as dividend

Distribution treated as dividend= $25,000 × 25%

Distribution treated as dividend= $6,250

Now let calculate the income recognized

Income recognized=$6,250+$7,500+$6,250

Income recognized=$20,000

Therefore How much income does Ethan recognize this year from these transactions is $20,000

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3 years ago
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Answer:

Cost per unit under variable costing                               $

Direct material                                                                 110

Direct labour                                                                    150

Variable manufacturing overhead                                 <u> 75 </u>

Cost per unit                                                                   <u>335 </u>

<u />

Cost per unit under absorption costing                         $

Direct material                                                                 110

Direct labour                                                                    150

Variable manufacturing overhead                                  75    

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Explanation:

In variable costing, cost per unit is calculated by the addition of all variable costs while in absorption costing, fixed manufacturing overhead      application rate is added to the variable costs in order to obtain the cost per unit.

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