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One of your wealthy clients, Cecile, invests $100,000 for sole ownership of an electing S corporation's stock. The corporation is in the process of developing a new food product. Cecile anticipates that the new business will need approximately $200,000 in capital (other than trade payables) during the first two years of its operations before it starts to earn a sufficient profits to pay a return on the shareholder's investment. The first $100,000 of this total is to come from Cecile's contributed capital. The remaining $100,000 of funds will come from one of the following three sources:
1. Have the corporation borrow the $100,000 from a local bank. Cecile is required to act as a guarantor for the loan.2. Have the corporation borrow $100,000 from the estate of Cecile's late husband. Cecile is the sole beneficiary of the estate.3. Have Cecile lend $100,000 to the corporation from her personal funds.
The S corporation will pay interest at a rate acceptable to the IRS. During the first two years of operations, the corporation anticipates losing $125,000 before it begins to earn a profit. Your tax manager has asked you to evaluate the tax ramifications of each of the three financing alternatives. Prepare a memorandum (citing applicable sources, such as the IRC) outlining the information you found in your research.
You received an email from Carl the operations manager from the California Container division. They produce packaging for cell phones. Carl understands that his product is an important cash producer for the company.
what is Giambi's inventory turnover? Giambi Corp had beginning inventory $10,000, cost of goods purchased $700,000, and ending inventory $140,000.
Karr Company purchased bonds with a face amount of $400,000 between interest payment dates. Karr purchased the bonds at 102, paid brokerage costs of $6,000, and paid accrued interest for three months of $10,000.
The clinic has provided the following data concerning the formulas used in its budgeting and its actual results for January:The activity variance for personnel expenses in January would be closest to:
John Haven purchased a bond for $9,500. The bond pays $300 interest every six months. If John decides to sell the bond after 18 months for $10,000 what would be his:
Which of the following is an example of a variable cost?
Aspen Co. expects to maintain the same inventories at the end of 2008 as at the beginnign of the year. The total of all production costs for the year is therefore assumed to be equal to the cost of goods sold. With this in mind, the various depart..
the solution of this exercise 16-27 Alternative methods of joint-cost allocation, product-mix decisions. The Southern Oil Company buys crude vegetable oil.
Explain why it might make sense for this company to award bonuses based on sales growth. How might this approach encourage poor business decisions when compared to a bonus plan tied to earnings?
Differentiate between the various rates of pay among the different major groups of employees, and include information about the differences between exempt and nonexempt employees. Discuss how wage and hour legislation has affected employment prac..
Mary, a U.S. citizen owned 25% of the stock of Floran Corporation, an electing S corporation. At the time of her death, the Floran stock may go to all the following without affecting the S election except
Other than the construction funds borrowed, the only other debt outstanding during the year was a $150,000, 10-year, 7% note payable dated January 1, YEar 1. How much interest should be capitalized by Starlight during Year 3?
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