Charleston Corporation (CC) now operates as a "regular" corporation, but it is considering a switch to S Corporation status. CC is owned by 50 stockholders who each hold 2% of the stock, and each faces a personal tax rate of 24%. The firm earns $2,500,000 per year before taxes, and since it has no need for retained earnings, it pays out all of its earnings as dividends. Assume that the corporate tax rate is 34% and the personal tax rate is 24%. How much more (or less) spendable income would each stockholder have if the firm elected S Corporation status? a. $16,220 b. $4,120 c. $12,920 d. $5,000 e. $9,120.

FINANCIAL ACCOUNTING
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ISBN:9781259964947
Author:Libby
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Chapter1: Financial Statements And Business Decisions
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Charleston Corporation (CC) now operates as a "regular" corporation, but it is considering a switch to S Corporation status. CC is owned by 50 stockholders who
each hold 2% of the stock, and each faces a personal tax rate of 24%. The firm earns $2,500,000 per year before taxes, and since it has no need for retained
earnings, it pays out all of its earnings as dividends. Assume that the corporate tax rate is 34% and the personal tax rate is 24%. How much more (or less)
spendable income would each stockholder have if the firm elected S Corporation status?
a. $16,220
b. $4,120,
Cc. $12,920
Cd. $5,000
e. $9,120.
Transcribed Image Text:Charleston Corporation (CC) now operates as a "regular" corporation, but it is considering a switch to S Corporation status. CC is owned by 50 stockholders who each hold 2% of the stock, and each faces a personal tax rate of 24%. The firm earns $2,500,000 per year before taxes, and since it has no need for retained earnings, it pays out all of its earnings as dividends. Assume that the corporate tax rate is 34% and the personal tax rate is 24%. How much more (or less) spendable income would each stockholder have if the firm elected S Corporation status? a. $16,220 b. $4,120, Cc. $12,920 Cd. $5,000 e. $9,120.
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