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Unformatted text preview: 80% or more). [$600,000 + $100,000 - $400,000 - $100,000 DRD =
Choice "c" is incorrect. The dividends received deduction allows for a special deduction of 80% of the
dividends received from a 20% to <80% owned domestic corporation, not 70% of the dividends received
(which applies only to ownership of 0% to <20%). [$600,000 + $100,000 - $400,000 - $70,000 DRD =
Choice "d" is incorrect. This answer option does not include the special dividends received deduction
[$600,000 + $100,000 - $400,000 - $0 DRD = $300,000]. CPA-05530 Type1 M/C A-D Corr Ans: D PM#111 R 3-01 78. CPA-05530 Released 2007 Page 33
A C corporation must use the accrual method of accounting in which of the following circumstances?
d. The business had average sales for the past three years of less than $1 million.
The business is a service company and has over $1 million in sales.
The business is a personal service business with over $15 million in sales.
The business has more than $10 million in average sales. CPA-05530
Choice "d" is correct. While the cash basis of accounting is used for...
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