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Accounting
1. Whitman is the:

1. Whitman is the:

FINANCIAL ACCOUNTING
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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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.
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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