Unformatted text preview: PA-02160
Choice "c" is correct. For the accumulated earnings tax, in this case, accumulated taxable income would
equal taxable income ($400,000) minus federal income taxes ($100,000) minus the minimum
accumulated earnings credit ($250,000) for manufacturing companies or $50,000.
Choice "a" is incorrect. Generally, the accumulated earnings tax is imposed when a corporation has
accumulated earnings in excess of $250,000. Thus, the amount of earnings subject to the accumulated
earnings tax must first be reduced by the $250,000.
Choice "b" is incorrect. Federal income tax is subtracted from the earnings of a corporation in calculating
the amount of excess earnings subject to the accumulated earnings tax.
Choice "d" is incorrect. Accumulated taxable income is $400,000. This amount ($400,000) minus federal
income tax ($100,000) minus the credit of $250,000 equals $50,000, which is the excess subject to the
accumulated earnings tax. CPA-02161 Type1 M/C A-D Corr Ans: A PM#82 R 3-01 64. CPA-02161 PII May 93 #56 Page 43
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