Question 1

Two investor corporations may not enter jointly into which of the following?

Accepted Answer

A) Joint venture 
B) Partnership 
C) Separate corporation 
D) Proprietorship 
A) Joint venture 
B) Partnership 
C) Separate corporation 
D) Proprietorship D

Question 2

Blake holds a 5% interest-bearing debt instrument in Day Co.Day Co.'s tax rate is 27% and Blake is in a 50% tax bracket.
Required:
A) Calculate the after-tax cost of the debt-instrument to Day Co.
B) Calculate the after-tax value of the interest for Blake.

Accepted Answer

A) .05 * (1-.27) = 3.65%
B) .05 * (1-.50) = 2.5%

Question 3

Tanner holds a 7% interest-bearing debt instrument in Eve Co.Eve Co.'s tax rate is 13% and Tanner is in a 45% tax bracket.
Required:
A) Calculate the after-tax cost of the debt-instrument to Eve Co.
B) Calculate the after-tax value of the interest for Tanner.

Accepted Answer

A) .07 * (1-.13) = 6.09%
B) .07 * (1-.45) = 3.85%

Question 4

Which of the following attitudes and actions is most likely to help decision-makers develop an efficient approach to taxation?

Accepted Answer

A) Cash flows should be considered from a before-tax perspective when making decisions. 
B) Functional managers should not be held responsible for the tax effects of decisions within their divisions. 
C) Tax costs to a business should be regarded as controllable expenses, much like product costs and selling costs. 
D) All managers should own a copy of the Income Tax Act. 
A) Cash flows should be considered from a before-tax perspective when making decisions. 
B) Functional managers should not be held responsible for the tax effects of decisions within their divisions. 
C) Tax costs to a business should be regarded as controllable expenses, much like product costs and selling costs. 
D) All managers should own a copy of the Income Tax Act.

Question 5

Which of the following statements is true?

Accepted Answer

A) Dividends paid by a corporation are deductible by that corporation and are a form of property income for the recipient. 
B) Dividends paid by a corporation are deductible by that corporation and are a form of business income for the recipient. 
C) Dividends paid by a corporation are not deductible by that corporation and are a form of business income for the recipient. 
D) Dividends paid by a corporation are not deductible by that corporation and are a form of property income for the recipient. 
A) Dividends paid by a corporation are deductible by that corporation and are a form of property income for the recipient. 
B) Dividends paid by a corporation are deductible by that corporation and are a form of business income for the recipient. 
C) Dividends paid by a corporation are not deductible by that corporation and are a form of business income for the recipient. 
D) Dividends paid by a corporation are not deductible by that corporation and are a form of property income for the recipient.

Question 6

The text book lists four fundamental tax variables which a manager needs to consider when making business decisions.These variables are: 1) primary types of income; 2) entities subject to taxation on income; 3) alternative forms of business and investing structures used by taxable entities structure; and 4) tax jurisdictions.List the relevant variables within these four categories.

Accepted Answer

Income: Business, Property, Employment,

Question 7

Which of the following is not considered to be a separate entity for tax purposes in Canada?

Accepted Answer

A) An individual 
B) A proprietorship 
C) A corporation 
D) A trust 
A) An individual 
B) A proprietorship 
C) A corporation 
D) A trust

Question 8

Logan holds a 7% interest-bearing debt instrument in Glow Co.Glow Co.'s tax rate is 27% and Logan is in a 45% tax bracket.Which of the following statements is correct?

Accepted Answer

A) The after-tax cost of the debt instrument is 5.11% to Glow Co.and the after-tax value to Logan is 3.85%. 
B) The after-tax cost of the debt instrument is 5.11% to Glow Co.and the after-tax value to Logan is 3.15%. 
C) The after-tax cost of the debt instrument is 1.89% to Glow Co.and the after-tax value to Logan is 3.15%. 
D) The after-tax cost of the debt instrument is 7% to Glow Co.and the after-tax value to Logan is 7%. 
A) The after-tax cost of the debt instrument is 5.11% to Glow Co.and the after-tax value to Logan is 3.85%. 
B) The after-tax cost of the debt instrument is 5.11% to Glow Co.and the after-tax value to Logan is 3.15%. 
C) The after-tax cost of the debt instrument is 1.89% to Glow Co.and the after-tax value to Logan is 3.15%. 
D) The after-tax cost of the debt instrument is 7% to Glow Co.and the after-tax value to Logan is 7%.

Question 9

Income tax is calculated for which of the following jurisdictional groups?

Accepted Answer

A) Municipal, provincial, and federal 
B) Municipal, federal, and foreign 
C) Provincial, federal, and foreign 
D) Municipal, provincial, and foreign 
A) Municipal, provincial, and federal 
B) Municipal, federal, and foreign 
C) Provincial, federal, and foreign 
D) Municipal, provincial, and foreign

Question 10

Explain what is meant by the statement that 'tax should be treated as a 'controllable cost''.

Accepted Answer

Just as decision makers in business must

Question 11

When assessing the value of a corporation, the most relevant information that decision-makers normally consider is

Accepted Answer

A) the potential for before-tax profits. 
B) the potential for after-tax profits. 
C) the current corporate tax rate. 
D) cash flow before-tax. 
A) the potential for before-tax profits. 
B) the potential for after-tax profits. 
C) the current corporate tax rate. 
D) cash flow before-tax.

Question 12

Jamie is an employee at ABC Ltd.and is in a 45% tax bracket.ABC Ltd.has a tax rate of 27%.The company has offered Jamie a 10% pay raise.Jamie's current salary is $50,000.
Required:
A) Calculate the after-tax cost of the raise to the ABC Ltd.
B) Calculate the after-tax value of the raise for Jamie.
Show all calculations.

Accepted Answer

A) After-tax cost to ABC Ltd.:

Question 13

Which of the following statements is false?

Accepted Answer

A) Cash flow should be calculated on an after-tax basis. 
B) The tax cost to a business should not be regarded as a cost of doing business. 
C) Income tax should be treated as a controllable cost. 
D) The value of an enterprise should not be based on pre-tax cash flow. 
A) Cash flow should be calculated on an after-tax basis. 
B) The tax cost to a business should not be regarded as a cost of doing business. 
C) Income tax should be treated as a controllable cost. 
D) The value of an enterprise should not be based on pre-tax cash flow.

Two investor corporations may not enter jointly into which of the following?

Blake holds a 5% interest-bearing debt instrument in Day Co.Day Co.'s tax rate is 27% and Blake is in a 50% tax bracket. Required: A) Calculate the after-tax cost of the debt-instrument to Day Co. B) Calculate the after-tax value of the interest for Blake.

Tanner holds a 7% interest-bearing debt instrument in Eve Co.Eve Co.'s tax rate is 13% and Tanner is in a 45% tax bracket. Required: A) Calculate the after-tax cost of the debt-instrument to Eve Co. B) Calculate the after-tax value of the interest for Tanner.

Which of the following attitudes and actions is most likely to help decision-makers develop an efficient approach to taxation?

Which of the following statements is true?

Which of the following is not considered to be a separate entity for tax purposes in Canada?

Logan holds a 7% interest-bearing debt instrument in Glow Co.Glow Co.'s tax rate is 27% and Logan is in a 45% tax bracket.Which of the following statements is correct?

Income tax is calculated for which of the following jurisdictional groups?

Explain what is meant by the statement that 'tax should be treated as a 'controllable cost''.

When assessing the value of a corporation, the most relevant information that decision-makers normally consider is

Which of the following statements is false?

Fundamentals of Tax Planning

Liability for Tax, Income Determination, and Administration of the Income Tax System

Income From Employment

Income From Business

The Acquisition, Use, and Disposal of Depreciable Property

Income From Property

Gains and Losses on the Disposition of Capital Propertycapital Gains

Other Income, Other Deductions, and Special Rules for Completing Net Income for Tax Purposes

Individuals: Determination of Taxable Income and Taxes Payable

Corporationsan Introduction

Organization, Capital Structures, and Income Distributions of Corporations

The Canadian-Controlled Private Corporation

Multiple Corporations and Their Reorganization

Partnerships

Limited Partnerships and Joint Ventures

Trusts

Business Acquisitions and Divestituresassets Versus Shares

Business Acquisitions and Divestiturestax-Deferred Sales

Domestic and International Business Expansion

Tax Aspects of Corporate Financing

GST/HST Overview

Business Valuations

Filters

Exam 1: Taxationits Role in Decision Making

Two investor corporations may not enter jointly into which of the following?

Blake holds a 5% interest-bearing debt instrument in Day Co.Day Co.'s tax rate is 27% and Blake is in a 50% tax bracket. Required: A) Calculate the after-tax cost of the debt-instrument to Day Co. B) Calculate the after-tax value of the interest for Blake.

Tanner holds a 7% interest-bearing debt instrument in Eve Co.Eve Co.'s tax rate is 13% and Tanner is in a 45% tax bracket. Required: A) Calculate the after-tax cost of the debt-instrument to Eve Co. B) Calculate the after-tax value of the interest for Tanner.

Which of the following attitudes and actions is most likely to help decision-makers develop an efficient approach to taxation?

Which of the following statements is true?

Which of the following is not considered to be a separate entity for tax purposes in Canada?

Logan holds a 7% interest-bearing debt instrument in Glow Co.Glow Co.'s tax rate is 27% and Logan is in a 45% tax bracket.Which of the following statements is correct?

Income tax is calculated for which of the following jurisdictional groups?

Explain what is meant by the statement that 'tax should be treated as a 'controllable cost''.

When assessing the value of a corporation, the most relevant information that decision-makers normally consider is

Which of the following statements is false?

Fundamentals of Tax Planning

Liability for Tax, Income Determination, and Administration of the Income Tax System

Income From Employment

Income From Business

The Acquisition, Use, and Disposal of Depreciable Property

Income From Property

Gains and Losses on the Disposition of Capital Propertycapital Gains

Other Income, Other Deductions, and Special Rules for Completing Net Income for Tax Purposes

Individuals: Determination of Taxable Income and Taxes Payable

Corporationsan Introduction

Organization, Capital Structures, and Income Distributions of Corporations

The Canadian-Controlled Private Corporation

Multiple Corporations and Their Reorganization

Partnerships

Limited Partnerships and Joint Ventures

Trusts

Business Acquisitions and Divestituresassets Versus Shares

Business Acquisitions and Divestiturestax-Deferred Sales

Domestic and International Business Expansion

Tax Aspects of Corporate Financing

GST/HST Overview

Business Valuations

Filters