Exam 5: Other Corporate Tax Levies

Given the following information about Jones Corporation, what are Jones's working capital needs using the Bardahl formula, assuming that federal income taxes are not an operating expense? Average inventory $ 33,000 Cost of goods sold 300,000 Purchases 250,000 Average accounts receivable balance 80,000 Average credit sales 320,000 Average accounts payable balance 30,000 Operating expense 400,000 Depreciation claimed as operating expense 50,000 Federal income taxes 25,000 Advances to suppliers 30,000

Identify which of the following statements is true.

The accumulated earnings tax is imposed at what rate?

A manufacturing corporation has accumulated E&P of $210,000 and current E&P of $65,000. Accumulated taxable income, before reduction for the accumulated earnings credit, is $90,000 for the current year. No dividends were paid during the year. The corporation has an increase in reasonable business needs of $35,000. If the corporation is not a service corporation and has reported no long-term capital gains, what is the amount of earnings subject to the accumulated earnings tax?

When using the Bardahl formula, an increase in accounts payable (while holding purchases and operating expenses constant) has which of the following effects on the working capital requirements?

The courts and the Treasury Regulations have mentioned a number of reasonable needs that allow a corporation to accrue earnings and avoid the accumulated earnings tax. What are these reasons?

The personal holding company tax

Which of the following is not permitted an accumulated earnings credit based on reasonable needs of the business?

Identify which of the following statements is false.

Identify which of the following statements is true.

Identify which of the following statements is true.

In determining accumulated taxable income for the purpose of the accumulated earnings tax, which one of the following is allowed as a deduction?

Church Corporation is a closely held C corporation. All of the stock is owned by Charles and Chanda Church. The corporation, in its second month of operation in its initial tax year, anticipates earning $150,000 of gross income in the current year. Gross income is expected to be approximately 40% dividends, 30% corporate bond interest, and 30% net real estate rentals (after interest, property taxes, and depreciation). Administrative expenses are expected to be $20,000. What special problems does the large amount of passive income that Church Corporation expects to earn present to you as their CPA?

Identify which of the following statements is true.

Identify which of the following statements is false.

Which of following generally does not indicate an unreasonable earnings accumulation?

Lawrence Corporation reports the following results during the current year: Taxable income $500,000 Federal income taxes 105,000 Dividends paid: June 5 50,000 Accumulated E&P balance: January 1 800,000 No dividends were paid in the throwback period. A long-term capital gain of $50,000 is included in taxable income. The statutory accumulated earnings tax exemption has been used up in prior years. An additional earnings accumulation of $60,000 for the current year can be justified as meeting the reasonable needs of the business. What is Lawrence Corporation's accumulated earnings tax liability?

Which of the following is not an adjustment to taxable income when computing the personal holding company tax?

The accumulated earnings tax does not apply to corporations that

Identify which of the following statements is true.