1. Whitman is the:
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text: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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