1. Whitman is the sole shareholder of Cheetah, Inc. Cheetah's taxable incomebefore the payment of Whitman's salary is $225,000. Based on this, Whitmanhas the corporation pay him a salary of $200,000 and a bonus of $25,000. Areasonable salary and bonus would be $175,000. Which of the following iscorrect?Whitman has salary and bonusincome of $175,000 anddividend income of $50,000.The taxable income of Cheetah,Inc., is $25,000 ($225,000 -$200,000).The taxable income of Cheetah,Inc., is $-0- ($225,000 - $225,000salary and bonuses).Whitman has salary and bonusincome of $225,000.

The taxable total income of the individual taxpayer includes the income earned by the respective…

Answered: 1. Whitman is the:

Business

Accounting

1. Whitman is the:

FINANCIAL ACCOUNTING

10th Edition

ISBN:9781259964947

Author:Libby

Publisher:Libby

Chapter1: Financial Statements And Business Decisions

Section: Chapter Questions

Problem 1Q

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Concept explainers

Audit Procedures

Audit Procedures are methods and techniques performed by the auditor to determine the quality of financial information of clients, thereby expressing an opinion on true & fair view of financial statements and entity position. They are identified and applied at the planning stage of audit after determining audit objectives, scope, approach, and risk assessment.

Question

1. Whitman is the sole shareholder of Cheetah, Inc. Cheetah's taxable income
before the payment of Whitman's salary is $225,000. Based on this, Whitman
has the corporation pay him a salary of $200,000 and a bonus of $25,000. A
reasonable salary and bonus would be $175,000. Which of the following is
correct?
Whitman has salary and bonus
income of $175,000 and
dividend income of $50,000.
The taxable income of Cheetah,
Inc., is $25,000 ($225,000 -
$200,000).
The taxable income of Cheetah,
Inc., is $-0- ($225,000 - $225,000
salary and bonuses).
Whitman has salary and bonus
income of $225,000.

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