Question 1

Briefly describe the accounting methods available for adoption by a C corporation.

Accepted Answer

In general, a C corporation must adopt t

Question 2

Norma formed Hyacinth Enterprises, a proprietorship, in 2012.In its first year, Hyacinth had operating income of $400,000 and operating expenses of $240,000.In addition, Hyacinth had a long-term capital loss of $10,000.Norma, the proprietor of Hyacinth Enterprises, withdrew $75,000 from Hyacinth during the year.Assuming Norma has no other capital gains or losses, how does this information affect her taxable income for 2012?

Accepted Answer

A) Increases Norma's taxable income by $157,000 ($160,000 ordinary business income - $3,000 long-term capital loss). 
B) Increases Norma's taxable income by $150,000 ($160,000 ordinary business income - $10,000 long-term capital loss). 
C) Increases Norma's taxable income by $75,000. 
D) Increases Norma's taxable income by $160,000. 
E) None of the above. 
A) Increases Norma's taxable income by $157,000 ($160,000 ordinary business income - $3,000 long-term capital loss). 
B) Increases Norma's taxable income by $150,000 ($160,000 ordinary business income - $10,000 long-term capital loss). 
C) Increases Norma's taxable income by $75,000. 
D) Increases Norma's taxable income by $160,000. 
E) None of the above.

Question 3

As a general rule, a personal service corporation (PSC) must use a calendar year as its accounting period.

Accepted Answer

A) True 
 B)False

Question 4

Elk, a C corporation, has $370,000 operating income and $290,000 operating expenses during the year.In addition, Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss.Elk's taxable income is:

Accepted Answer

A) $63,000. 
B) $73,000. 
C) $80,000. 
D) $90,000. 
E) None of the above. 
A) $63,000. 
B) $73,000. 
C) $80,000. 
D) $90,000. 
E) None of the above.

Question 5

Flycatcher Corporation, a C corporation, has two equal individual shareholders, Nancy and Pasqual. In the current year, Flycatcher earned $100,000 net profit and paid a dividend of $10,000 to each shareholder. Regardless of any tax consequences resulting from their interests in Flycatcher, Nancy is in the 33% marginal tax bracket and Pasqual is in the 15% marginal tax bracket. With respect to the current year, which of the following statements is incorrect?

Accepted Answer

A) Flycatcher cannot avoid the corporate tax altogether by paying out all $100,000 of net profit as dividends to the shareholders. 
B) Nancy incurs income tax of $1,500 on her dividend income. 
C) Pasqual incurs income tax of $1,500 on his dividend income. 
D) Flycatcher pays corporate tax of $22,250. 
E) None of the above. 
A) Flycatcher cannot avoid the corporate tax altogether by paying out all $100,000 of net profit as dividends to the shareholders. 
B) Nancy incurs income tax of $1,500 on her dividend income. 
C) Pasqual incurs income tax of $1,500 on his dividend income. 
D) Flycatcher pays corporate tax of $22,250. 
E) None of the above.

Question 6

Which of the following statements is correct regarding the taxation of C corporations?

Accepted Answer

A) Schedule M-2 is used to reconcile net income as computed for financial accounting purposes with taxable income reported on the corporation's tax return. 
B) The corporate return is filed on Form 1120S. 
C) Corporations can receive an automatic extension of nine months for filing the corporate return by filing Form 7004 by the due date for the return. 
D) A corporation with total assets of $7.5 million or more is required to file Schedule M-3. 
E) None of the above. 
A) Schedule M-2 is used to reconcile net income as computed for financial accounting purposes with taxable income reported on the corporation's tax return. 
B) The corporate return is filed on Form 1120S. 
C) Corporations can receive an automatic extension of nine months for filing the corporate return by filing Form 7004 by the due date for the return. 
D) A corporation with total assets of $7.5 million or more is required to file Schedule M-3. 
E) None of the above.

Question 7

Schedule M-2 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.

Accepted Answer

A) True 
 B)False

Question 8

Crow Corporation, a C corporation, donated scientific property (basis of $30,000, fair market value of $50,000) to State University, a qualified charitable organization, to be used in research.Crow had held the property for four months as inventory. Crow Corporation may deduct $50,000 for the charitable contribution (ignoring the taxable income limitation).

Accepted Answer

A) True 
 B)False

Question 9

Hippo, Inc., a calendar year C corporation, manufactures golf gloves.For 2012, Hippo had taxable income (before DPAD) of $900,000, qualified domestic production activities income of $750,000, and W-2 wages related to qualified production activities income of $140,000.Hippo's domestic production activities deduction for 2012 is:

Accepted Answer

A) $0. 
B) $12,600. 
C) $67,500. 
D) $70,000. 
E) None of the above. 
A) $0. 
B) $12,600. 
C) $67,500. 
D) $70,000. 
E) None of the above.

Briefly describe the accounting methods available for adoption by a C corporation.

As a general rule, a personal service corporation (PSC) must use a calendar year as its accounting period.

Elk, a C corporation, has $370,000 operating income and $290,000 operating expenses during the year.In addition, Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss.Elk's taxable income is:

Which of the following statements is correct regarding the taxation of C corporations?

Schedule M-2 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S: Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

Filters

Exam 17: Corporations: Introduction and Operating Rules

Briefly describe the accounting methods available for adoption by a C corporation.

As a general rule, a personal service corporation (PSC) must use a calendar year as its accounting period.

Elk, a C corporation, has $370,000 operating income and $290,000 operating expenses during the year.In addition, Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss.Elk's taxable income is:

Which of the following statements is correct regarding the taxation of C corporations?

Schedule M-2 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.

An Introduction to Taxation and Understanding the Federal Tax Law

Working With the Tax Law

Computing the Tax

Gross Income: Concepts and Inclusions

Gross Income: Exclusions

Deductions and Losses: in General

Deductions and Losses: Certain Business Expenses and Losses

Depreciation, Cost Recovery, Amortization, and Depletion

Deductions: Employee and Self-Employed Related Expenses

Deductions and Losses: Certain Itemized Deductions

Investor Losses

Tax Credits and Payments

A: Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 1

Property Transactions: Determination of Gain or Loss, Basis Considerations, and Nontaxable Exchanges-Part 2

Property Transactions: Capital Gains and Losses, 1231, Recapture Provisions

Alternative Minimum Tax

Accounting Periods and Methods

Corporations: Organization and Capital Structure

Corporations: Distributions Not in Complete Liquidation

Corporations: Distributions in Complete Liquidation and an Overview of Reorganizations

Partnerships

S: Corporations

Exempt Entities

Multistate Corporate Taxation

Taxation of International Transactions

Tax Practice and Ethics

Income Taxation of Trusts and Estates

Filters