Exam 5: Corporate Operations

If a corporation's cash charitable contributions exceed the charitable contribution deduction limit,what kind of book-tax difference is created?

AmStore Inc.sold some of its heavy machinery at a gain.AmStore used the straight-line method for financial accounting depreciation and MACRS for tax cost-recovery.If accumulated depreciation for financial accounting purposes is less than accumulated depreciation for tax reporting purposes,what is the nature of the book-tax difference associated with the gain on the sale?

Which of the following statements regarding net operating losses generated in 2017 is true?

Which of the following describes the correct treatment of the exercise of nonqualified stock options (NQOs)that were granted when ASC 718 applies?

Three brothers each own 20% of the stock in three corporations.Because no single brother owns more than 50% of a corporation,the tax law would not treat the corporations as a controlled group.

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?

In January 2016,Khors Company issues nonqualified stock options to its CEO,Jenny Svaro.Because the company does not expect Ms.Svaro to leave the company,the options vest at the time they are granted with a total value of $50,000.In December of 2017,the company experiences a surge in its stock price,and Ms.Svaro exercises the options.The total bargain element at the time of exercise is $60,000.For 2017,what is the book-tax difference due to the options exercised?

In 2017,Carbonfab Manufacturers Inc.expensed $125,000 of depreciation for book purposes,but for tax purposes,it deducted $179,000.Carbonfab also sold equipment for $500,000.The book adjusted basis of the equipment sold was $350,000,while the adjusted basis for tax purposes was $210,000.What is the total book-tax difference associated with depreciation and the gain on sale? Is it favorable or unfavorable? What amount of the book-tax difference is permanent and what amount is temporary?

For book purposes,RadioAircast Inc.reported $15,000 of income from municipal bonds in 2017.It also expensed $12,000 of radio station filing fines paid to the FCC the same year.What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the total adjustment is permanent and what amount is temporary?

Which of the following statements regarding book-tax differences associated with purchased goodwill is false?

Most corporations use the annualized income method to determine their required annual payment for purposes of making quarterly estimated payments.

In general,a corporation can elect to use either the accrual or cash method of accounting no matter how large the corporation.

A corporation may carry a net capital loss back three years and forward five years.

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

Which of the following statements regarding controlled groups is false?

XPO Corporation has a minimum tax credit of $51,000 from 2016.If its 2017 tentative minimum tax is $211,000 and its regular tax liability is $250,000,what is its minimum tax credit carryover to 2018?

Which of the following statements regarding the dividends and/or the dividends received deduction (DRD)is true?

Tatoo Inc.reported a net capital loss of $13,000 in 2017.It had a net capital gain of $4,300 in 2015 and $3,000 in 2014.In 2016,although the company suffered a net operating loss,it had net capital gains of $1,000.What is the amount of Tatoo's capital loss carryover remaining after it applies the carryback?

In 2014,Smith Traders Inc.reported taxable income of $100,000.In 2015,it reported taxable income of $15,000.In 2016,it reported taxable income of $95,000.In 2017,Smith Traders experienced a net operating loss of $25,000.What amount of refund can Smith Traders receive if it does not elect to forgo the carry back (see the Corporate Tax Rate Schedule.)?

iScope Inc.paid $3,000 in interest on a loan it used to purchase municipal bonds.What is the nature of the book-tax difference relating to this expense?