Question 1

The principle of conservatism reflected by GAAP is identical to the principle of conservatism reflected in the tax law.

Accepted Answer

A) True 
 B)False

Question 2

If an accrual basis taxpayer receives a prepayment of rent income, the receipt results in an unfavorable temporary book/tax difference.

Accepted Answer

A) True 
 B)False

Question 3

Murray Inc., a calendar year, accrual basis corporation, accrued $946,000 accrued salary and wage expense at the end of 2015. Murray paid the entire amount of the accrued liability on January 13, 2016. Murray can deduct the entire $946,000 accrued expense in 2015.

Accepted Answer

A) True 
 B)False

Question 4

Goff Inc.'s taxable income is computed as follows.   Goff's tax rate is 34%. Which of the following statements is true?

Accepted Answer

A)  The permanent differences caused a $26,496 net increase in Goff's deferred tax liabilities. 
B)  The permanent differences caused a $26,496 net increase in Goff's deferred tax assets. 
C)  The temporary differences caused a $161,568 net increase in Goff's deferred tax assets. 
D)  The temporary differences caused a $161,568 net increase in Goff's deferred tax liabilities. 
A)  The permanent differences caused a $26,496 net increase in Goff's deferred tax liabilities. 
B)  The permanent differences caused a $26,496 net increase in Goff's deferred tax assets. 
C)  The temporary differences caused a $161,568 net increase in Goff's deferred tax assets. 
D)  The temporary differences caused a $161,568 net increase in Goff's deferred tax liabilities.

Question 5

Which of the following statements about the all-events test is false?

Accepted Answer

A)  An accrued expense is not deductible unless the liability for the expense is fixed. 
B)  An accrued expense is not deductible unless the amount of the expense is determinable with reasonable accuracy. 
C)  An accrued expense is not deductible unless economic performance with respect to the liability has occurred. 
D)  None of the above is false. 
A)  An accrued expense is not deductible unless the liability for the expense is fixed. 
B)  An accrued expense is not deductible unless the amount of the expense is determinable with reasonable accuracy. 
C)  An accrued expense is not deductible unless economic performance with respect to the liability has occurred. 
D)  None of the above is false.

Question 6

Which of the following statements about tax expense per books and tax payable is false?

Accepted Answer

A)  If a corporation has no temporary differences between book income and taxable income, tax expense per books equals tax payable. 
B)  If a corporation has no permanent differences between book income and taxable income, tax expense per books equals tax payable. 
C)  Tax expense per books and tax payable are calculated from the same rate schedule. 
D)  If a corporation has no permanent differences between book income and taxable income, tax expense per books equals tax payable and tax expense per books and tax payable are calculated from the same rate schedule. 
A)  If a corporation has no temporary differences between book income and taxable income, tax expense per books equals tax payable. 
B)  If a corporation has no permanent differences between book income and taxable income, tax expense per books equals tax payable. 
C)  Tax expense per books and tax payable are calculated from the same rate schedule. 
D)  If a corporation has no permanent differences between book income and taxable income, tax expense per books equals tax payable and tax expense per books and tax payable are calculated from the same rate schedule.

Question 7

Poole Services, a calendar year taxpayer, billed a client for $1,675 of services on November 30, 2015, and received a check in full payment from the client on January 12, 2016. If Poole is a cash basis taxpayer, it reports $1,675 taxable income in 2015.

Accepted Answer

A) True 
 B)False

Question 8

Tax expense per books is based on:

Accepted Answer

A)  Before-tax book income 
B)  Before-tax book income adjusted for permanent differences 
C)  Before-tax book income adjusted for temporary differences 
D)  Before-tax book income adjusted for both permanent and temporary differences 
A)  Before-tax book income 
B)  Before-tax book income adjusted for permanent differences 
C)  Before-tax book income adjusted for temporary differences 
D)  Before-tax book income adjusted for both permanent and temporary differences

Question 9

HHF Corporation received permission from the IRS to change its taxable year from a fiscal year ending August 31 to a calendar year. Consequently, HHF filed a short-period return for the four-month period from September 1 through December 31. The taxable income reported on the return was $56,000. Use the corporate tax rates in Appendix C of the text to compute HHF's tax on this income (to the nearest dollar).

Accepted Answer

A)  $9,000 
B)  $14,000 
C)  $16,257 
D)  $48,770 
A)  $9,000 
B)  $14,000 
C)  $16,257 
D)  $48,770

Question 10

Monro Inc. uses the accrual method of accounting. Here is a reconciliation of Monro's allowance for bad debts for the current year.   Which of the following statements is true?

Accepted Answer

A)  Bad debt expense per books and the deduction for bad debts is $69,650. 
B)  Bad debt expense per books and the deduction for bad debts is $88,500. 
C)  Bad debt expense per books is $80,000, and the deduction for bad debts is $88,500. 
D)  Bad debt expense per books is $88,500, and the deduction for bad debts is $80,000. 
A)  Bad debt expense per books and the deduction for bad debts is $69,650. 
B)  Bad debt expense per books and the deduction for bad debts is $88,500. 
C)  Bad debt expense per books is $80,000, and the deduction for bad debts is $88,500. 
D)  Bad debt expense per books is $88,500, and the deduction for bad debts is $80,000.

Question 11

Ladow Inc. incurred a $32,000 net operating loss in 2015. Ladow's 2013 taxable income was $28,000, and its 2014 taxable income was $149,200. Use the corporate tax rates included in Appendix C to compute Ladow's refund from an NOL carryback deduction.

Accepted Answer

A)  $5,760 
B)  $10,880 
C)  $12,480 
D)  None of the above 
A)  $5,760 
B)  $10,880 
C)  $12,480 
D)  None of the above

Question 12

Which of the following statements about the cash method of accounting is false?

Accepted Answer

A)  Under the cash method, annual taxable income equals annual net cash inflow. 
B)  The revenue from a sale of goods is recognized when payment is received. 
C)  An expense is recognized when the expense is paid. 
D)  None of the above is false. 
A)  Under the cash method, annual taxable income equals annual net cash inflow. 
B)  The revenue from a sale of goods is recognized when payment is received. 
C)  An expense is recognized when the expense is paid. 
D)  None of the above is false.

Question 13

The tax law does not allows deductions based on estimated expenses that result in an allowance or reserve for financial statement purposes.

Accepted Answer

A) True 
 B)False

Question 14

PPQ Inc. wants to change from a hybrid method of accounting to the accrual method of accounting for tax purposes. PPQ can't make this change without receiving permission from the IRS.

Accepted Answer

A) True 
 B)False

Question 15

A taxpayer that wants to change its taxable year from a fiscal year to a calendar year is not required to receive permission from the IRS to make the change.

Accepted Answer

A) True 
 B)False

Question 16

Which of the following statements about the NOL deduction is false?

Accepted Answer

A)  The deduction prevents the tax distortion that could result from an inflexible one-year reporting period. 
B)  The deduction results in a tax refund if the NOL can be carried back against previous years' taxable income. 
C)  The deduction has value based on the NPV of its related tax savings. 
D)  None of the above statements is false. 
A)  The deduction prevents the tax distortion that could result from an inflexible one-year reporting period. 
B)  The deduction results in a tax refund if the NOL can be carried back against previous years' taxable income. 
C)  The deduction has value based on the NPV of its related tax savings. 
D)  None of the above statements is false.

The principle of conservatism reflected by GAAP is identical to the principle of conservatism reflected in the tax law.

If an accrual basis taxpayer receives a prepayment of rent income, the receipt results in an unfavorable temporary book/tax difference.

Murray Inc., a calendar year, accrual basis corporation, accrued $946,000 accrued salary and wage expense at the end of 2015. Murray paid the entire amount of the accrued liability on January 13, 2016. Murray can deduct the entire $946,000 accrued expense in 2015.

Goff Inc.'s taxable income is computed as follows. Goff's tax rate is 34%. Which of the following statements is true?

Which of the following statements about the all-events test is false?

Which of the following statements about tax expense per books and tax payable is false?

Poole Services, a calendar year taxpayer, billed a client for $1,675 of services on November 30, 2015, and received a check in full payment from the client on January 12, 2016. If Poole is a cash basis taxpayer, it reports $1,675 taxable income in 2015.

Tax expense per books is based on:

Monro Inc. uses the accrual method of accounting. Here is a reconciliation of Monro's allowance for bad debts for the current year. Which of the following statements is true?

Ladow Inc. incurred a $32,000 net operating loss in 2015. Ladow's 2013 taxable income was $28,000, and its 2014 taxable income was $149,200. Use the corporate tax rates included in Appendix C to compute Ladow's refund from an NOL carryback deduction.

Which of the following statements about the cash method of accounting is false?

The tax law does not allows deductions based on estimated expenses that result in an allowance or reserve for financial statement purposes.

PPQ Inc. wants to change from a hybrid method of accounting to the accrual method of accounting for tax purposes. PPQ can't make this change without receiving permission from the IRS.

A taxpayer that wants to change its taxable year from a fiscal year to a calendar year is not required to receive permission from the IRS to make the change.

Which of the following statements about the NOL deduction is false?

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 6: Taxable Income From Business Operations

The principle of conservatism reflected by GAAP is identical to the principle of conservatism reflected in the tax law.

If an accrual basis taxpayer receives a prepayment of rent income, the receipt results in an unfavorable temporary book/tax difference.

Murray Inc., a calendar year, accrual basis corporation, accrued $946,000 accrued salary and wage expense at the end of 2015. Murray paid the entire amount of the accrued liability on January 13, 2016. Murray can deduct the entire $946,000 accrued expense in 2015.

Goff Inc.'s taxable income is computed as follows. Goff's tax rate is 34%. Which of the following statements is true?

Which of the following statements about the all-events test is false?

Which of the following statements about tax expense per books and tax payable is false?

Poole Services, a calendar year taxpayer, billed a client for $1,675 of services on November 30, 2015, and received a check in full payment from the client on January 12, 2016. If Poole is a cash basis taxpayer, it reports $1,675 taxable income in 2015.

Tax expense per books is based on:

Monro Inc. uses the accrual method of accounting. Here is a reconciliation of Monro's allowance for bad debts for the current year. Which of the following statements is true?

Ladow Inc. incurred a $32,000 net operating loss in 2015. Ladow's 2013 taxable income was $28,000, and its 2014 taxable income was $149,200. Use the corporate tax rates included in Appendix C to compute Ladow's refund from an NOL carryback deduction.

Which of the following statements about the cash method of accounting is false?

The tax law does not allows deductions based on estimated expenses that result in an allowance or reserve for financial statement purposes.

PPQ Inc. wants to change from a hybrid method of accounting to the accrual method of accounting for tax purposes. PPQ can't make this change without receiving permission from the IRS.

A taxpayer that wants to change its taxable year from a fiscal year to a calendar year is not required to receive permission from the IRS to make the change.

Which of the following statements about the NOL deduction is false?

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, Partnerships, Llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters