Problem 04-61 (LO 04-3) (Algo)Dave and his friend Stewart each owns 50 percent of KBS. During the year, Dave received $89,000 compensation for services heperformed for KBS during the year. He performed a significant amount of work for the entity, and he was heavily involved inmanagement decisions for the entity (he was not a passive investor in KBS). After deducting Dave's compensation, KBS reportedtaxable income of $35,600.How much FICA and/or self-employment tax is Dave required to pay on his compensation and his share of the KBS income if KBS isformed as a C corporation, an S corporation, or a limited liability company (taxed as a partnership) (ignore the 0.9 percent additionalMedicare tax)? How much FICA tax would the entity be required to pay on the compensation paid to Dave?Note: Do not round any percentage calculations. Round other intermediate calculations and final answers to the nearest wholedollar amount.C CorporationS CorporationLimited liability companyFICA Tax that Dave paysFICA Tax that Entity pays

Self-employed individuals have to pay self-employment tax. This tax is calculated from the net…

Answered: Dave and his friend Stewa

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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ANSWER AND RESOLVE THIS PROBLEM AND ANSWER SHOULD BEGIN WITH A CLEAR CONCLUSION THEN FOLLOWED BY BRIEF DISCUSSIONS. A, B, C, X and Y are senior graduating Accountancy students in Far Southern University. Due to restrictions brought about by worsening COVID-19 pandemic, they have been staying at their common place in the province of Batanes. Among the four who are childhood friends since birth, only C is acquainted to X. While studying online to pursue their degree, they want to accomplish something else on the side. By way of a backgrounder, A had inherited from his departed parents 1 hectare of bare agricultural land. He wants to engage in an enterprise that will make his land productive. B is an independent self-sustaining seasonal farmer who owns 5 heads of young cattle and he wants to create an entity that will help him maximize the potential of what he has. C is a philanthropist at heart who is willing to help his town folks by providing them alternative sources of living…
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