Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

Earnings of C corporations can be:

Excluded from taxable income

Distributed to shareholders as dividends

Recorded as a liability on the balance sheet

Directly deducted from net sales

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Verified step by step guidance

Understand the concept of C corporations: A C corporation is a legal structure for a corporation in which the owners, or shareholders, are taxed separately from the entity. This structure allows the corporation to retain earnings and distribute them as dividends.

Review the options provided in the problem: The question asks about how earnings of C corporations can be handled. The options include exclusion from taxable income, distribution as dividends, recording as a liability, or direct deduction from net sales.

Analyze the option 'Excluded from taxable income': Earnings of C corporations are subject to corporate income tax and cannot be excluded from taxable income. This option is incorrect.

Evaluate the option 'Distributed to shareholders as dividends': C corporations can distribute their earnings to shareholders in the form of dividends. These dividends are then taxed at the shareholder level, making this option correct.

Assess the remaining options: 'Recorded as a liability on the balance sheet' is incorrect because earnings are recorded as equity, not liabilities. 'Directly deducted from net sales' is also incorrect because earnings are calculated after deducting expenses from net sales, not directly deducted from net sales.