Question 1

Which of the following statements regarding book-tax differences is true?

Accepted Answer

A)  Income excludable for tax purposes usually creates a temporary book-tax difference. 
B)  Corporations will eventually recognize the same amount of income for book and tax purposes for income-related temporary book-tax differences. 
C)  Corporations are not required to report book-tax differences on their income tax returns. 
D)  None of the choices are true. 
A)  Income excludable for tax purposes usually creates a temporary book-tax difference. 
B)  Corporations will eventually recognize the same amount of income for book and tax purposes for income-related temporary book-tax differences. 
C)  Corporations are not required to report book-tax differences on their income tax returns. 
D)  None of the choices are true.

Question 2

What is the unextended due date of the tax return of a calendar-year corporation for2017?

Accepted Answer

A)  September 15. 
B)  February 15. 
C)  March 15. 
D)  April 15. 
A)  September 15. 
B)  February 15. 
C)  March 15. 
D)  April 15.

Question 3

In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. Adams has a favorable temporary book-tax difference for that year.

Accepted Answer

A) True 
 B)False

Question 4

Large corporations (gross receipts of $5 million or more) are allowed to use the cashmethod of accounting for at least the first two years of their existence.

Accepted Answer

A) True 
 B)False

Question 5

Orange Inc. issued 20,000 nonqualified stock options valued at $40,000 (in total). The options vest over two years-half in 2017 (the year of issue) and half in 2018. One thousand options are exercised in 2018 with a bargain element on each option of $6. What is the 2018 book-tax difference associated with the stock options?

Accepted Answer

A)  $24,000 favorable. 
B)  $6,000 favorable. 
C)  $14,000 unfavorable. 
D)  $24,000 unfavorable. 
E)  None of the choices are correct. 
A)  $24,000 favorable. 
B)  $6,000 favorable. 
C)  $14,000 unfavorable. 
D)  $24,000 unfavorable. 
E)  None of the choices are correct.

Question 6

On January 1, 2015, Credit Inc. recorded goodwill valued at $270,000 when it acquired the assets of another company. At the end of 2016, the auditors of Credit Inc. determined that the goodwill had been impaired by $50,000 and Credit Inc. wrote down the book value of the goodwill by $50,000. During 2017, the goodwill was not further impaired. In 2018, additional goodwill was impaired and was written down another $18,000 for financial reporting purposes. What is the temporary book-tax difference associated with the purchased goodwill in 2016, 2017, and 2018? Are the differences favorable or unfavorable? Are the differences permanent or temporary?

Accepted Answer

2016: $32,000 unfavorable, tem

Question 7

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

Accepted Answer

A)  Net capital loss carrybacks. 
B)  NOL carryovers. 
C)  Charitable contributions. 
D)  NOL carrybacks. 
A)  Net capital loss carrybacks. 
B)  NOL carryovers. 
C)  Charitable contributions. 
D)  NOL carrybacks.

Question 8

Studios reported a net capital loss of $30,000 in year 5. It reported net capital gains of$14,000 in year 4 and $27,000 in year 6. What is the amount and nature of the book-tax difference in year 6 related to the net capital carryover?

Accepted Answer

A)  $16,000 favorable. 
B)  $11,000 unfavorable. 
C)  $11,000 favorable. 
D)  $16,000 unfavorable. 
A)  $16,000 favorable. 
B)  $11,000 unfavorable. 
C)  $11,000 favorable. 
D)  $16,000 unfavorable.

Question 9

The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

Accepted Answer

A) True 
 B)False

Question 10

For estimated tax purposes, a "large" corporation is any corporation with average annual gross receipts of $5,000,000 in the three years prior to the current year.

Accepted Answer

A) True 
 B)False

Question 11

An affiliated group must file a consolidated tax return.

Accepted Answer

A) True 
 B)False

Question 12

Schedule M-1 reconciles from book income to bottom line taxable income (the taxable income that is applied to the tax rates to determine the corporation's gross tax liability).

Accepted Answer

A) True 
 B)False

Question 13

Corporations are not allowed to deduct charitable contributions in excess of 10% of the corporation's taxable income (before the charitable contribution and certain otherdeductions).

Accepted Answer

A) True 
 B)False

Question 14

Which of the following is not calculated in the corporate income tax formula?

Accepted Answer

A)  Adjusted gross income. 
B)  Gross income. 
C)  Taxable income. 
D)  Regular tax liability. 
A)  Adjusted gross income. 
B)  Gross income. 
C)  Taxable income. 
D)  Regular tax liability.

Question 15

Urban Corporation receives tax-exempt income from Denver municipal bonds. All the proceeds from the bonds were used to fund public projects. In computing adjustedcurrent earnings in its AMT computation, Urban must add back the interest income from its municipal bonds.

Accepted Answer

A) True 
 B)False

Question 16

A corporation generally will report a favorable, temporary book-tax difference when it deducts a charitable contribution carryover.

Accepted Answer

A) True 
 B)False

Question 17

The dividends received deduction is subject to a limitation based on modified taxable income.

Accepted Answer

A) True 
 B)False

Question 18

Which of the following statements regarding incentive stock options (ISOs) is false?

Accepted Answer

A)  For ISOs granted when ASC 718 applies, book-tax differences are always unfavorable. 
B)  If ASC 718 applies, book-tax differences associated with ISOs may be either permanent or temporary. 
C)  If ASC 718 applies, the value expensed for book purposes in a given year is the value of the options that accrue. 
D)  If ASC 718 does not apply, ISOs do not create book-tax differences. 
A)  For ISOs granted when ASC 718 applies, book-tax differences are always unfavorable. 
B)  If ASC 718 applies, book-tax differences associated with ISOs may be either permanent or temporary. 
C)  If ASC 718 applies, the value expensed for book purposes in a given year is the value of the options that accrue. 
D)  If ASC 718 does not apply, ISOs do not create book-tax differences.

Question 19

Over what time period do corporations amortize purchased goodwill for tax purposes?

Accepted Answer

A)  180 months. 
B)  60 months. 
C)  150 months. 
D)  None of the choices are correct. 
A)  180 months. 
B)  60 months. 
C)  150 months. 
D)  None of the choices are correct.

Question 20

For corporations, which of the following regarding net capital losses is true?

Accepted Answer

A)  A corporation that experiences a net capital loss in year 4 first carries the loss back to year 3, then year 2, and then year 1 before carrying it forward. 
B)  Net capital loss carrybacks and carryovers create temporary book-tax differences if they are used before they expire. 
C)  A corporation that experiences a net capital loss has a favorable book-tax difference in the year of the loss. 
D)  Net capital loss carrybacks are deductible in determining a corporation's net operating loss. 
A)  A corporation that experiences a net capital loss in year 4 first carries the loss back to year 3, then year 2, and then year 1 before carrying it forward. 
B)  Net capital loss carrybacks and carryovers create temporary book-tax differences if they are used before they expire. 
C)  A corporation that experiences a net capital loss has a favorable book-tax difference in the year of the loss. 
D)  Net capital loss carrybacks are deductible in determining a corporation's net operating loss.

Exam 16: Corporate Operations

Which of the following statements regarding book-tax differences is true?

What is the unextended due date of the tax return of a calendar-year corporation for2017?

In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. Adams has a favorable temporary book-tax difference for that year.

Large corporations (gross receipts of $5 million or more) are allowed to use the cashmethod of accounting for at least the first two years of their existence.

Which of the following is deductible in calculating the charitable contribution limit modified taxable income?

Studios reported a net capital loss of $30,000 in year 5. It reported net capital gains of$14,000 in year 4 and $27,000 in year 6. What is the amount and nature of the book-tax difference in year 6 related to the net capital carryover?

The rules for consolidated reporting for financial statement purposes are the same as the rules for consolidated reporting for tax purposes.

For estimated tax purposes, a "large" corporation is any corporation with average annual gross receipts of $5,000,000 in the three years prior to the current year.

An affiliated group must file a consolidated tax return.

Schedule M-1 reconciles from book income to bottom line taxable income (the taxable income that is applied to the tax rates to determine the corporation's gross tax liability).

Corporations are not allowed to deduct charitable contributions in excess of 10% of the corporation's taxable income (before the charitable contribution and certain otherdeductions).

Which of the following is not calculated in the corporate income tax formula?

Urban Corporation receives tax-exempt income from Denver municipal bonds. All the proceeds from the bonds were used to fund public projects. In computing adjustedcurrent earnings in its AMT computation, Urban must add back the interest income from its municipal bonds.

A corporation generally will report a favorable, temporary book-tax difference when it deducts a charitable contribution carryover.

The dividends received deduction is subject to a limitation based on modified taxable income.

Which of the following statements regarding incentive stock options (ISOs) is false?

Over what time period do corporations amortize purchased goodwill for tax purposes?

For corporations, which of the following regarding net capital losses is true?

An Introduction to Tax

Tax Compliance, the Irs, and Tax Authorities

Tax Planning Strategies and Related Limitations

Individual Income Tax Overview, Exemptions, and Filing Status

Gross Income and Exclusions

Individual Deductions

Investments

Individual Income Tax Computation and Tax Credits

Business Income, Deductions, and Accounting Methods

Property Acquisition and Cost Recovery

Property Dispositions

Compensation

Retirement Savings and Deferred Compensation

Tax Consequences of Home Ownership

Entities Overview

Accounting for Income Taxes

Corporate Taxation: Nonliquidating Distributions

Corporate Formation, Reorganization, and Liquidation

Forming and Operating Partnerships

Dispositions of Partnership Interests and Partnership Distributions

S Corporations

State and Local Taxes

The US Taxation of Multinational Transactions

Transfer Taxes and Wealth Planning

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