Question 1

Bisou Inc. made a $48,200 contribution to charity this year. Only $39,000 of the contribution was deductible. Bisou can carry the $9,200 nondeductible contribution back three years and forward five years.

Accepted Answer

A) True 
 B)False

Question 2

If a corporation's depreciation expense for regular tax purposes is $32,000 and its depreciation expense for alternative minimum tax purposes is $28,000, such corporation will have a negative (decrease) depreciation adjustment for alternative minimum taxable income.

Accepted Answer

A) True 
 B)False

Question 3

For tax years beginning after December 31, 2015, which of the following statements regarding corporate tax filing requirements is false?

Accepted Answer

A)  Corporations must file their annual federal income tax returns by the 15th day of the fourth month following the close of the taxable year. 
B)  Most corporations may request an automatic six-month extension of time to file their federal income tax returns. 
C)  An extension of the income tax filing deadline does not extend the payment deadline for any balance of tax due for the taxable year. 
D)  Corporations must file their annual federal income tax returns by 15th day of the third month following the close of the taxable year.

Question 4

The corporate characteristic of limited liability is more important to the shareholders than the characteristic of centralized management.

Accepted Answer

A) True 
 B)False

Question 5

The domestic production activities deduction is a permanent book/tax difference.

Accepted Answer

A) True 
 B)False

Question 6

The taxable income earned by a personal service corporation is taxed at a flat rate of 35%.

Accepted Answer

A) True 
 B)False

Question 7

Silver Bullet Inc. reported the following for its current tax year: $$\begin{array} { l r } 
\text { Regular taxable income } & \$ 200,000 \
\text { AMTI in excess of exemption } & 416,250
\end{array}$$ Compute Silver Bullet's total income tax liability.

Accepted Answer

A)  $22,000. 
B)  $83,250. 
C)  $61,250. 
D)  $141,525.

Question 8

Torquay Inc.'s 2015 taxable income was $9,782,200, and its tax liability was $3,325,948. Torquay's director of tax estimates that the corporation's 2016 taxable income will be $13,350,000. Use the corporate tax rate schedule to compute Torquay's 2016 estimated tax payment due on April 15, 2016.

Accepted Answer

A)  $1,134,750 
B)  $1,028,813 
C)  $831,487 
D)  $1,143,125

Question 9

Westside, Inc. owns 15% of Innsbrook's common stock. This year, Westside generated $50,000 operating income and received $20,000 dividends from Innsbrook. Westside's taxable income is:

Accepted Answer

A)  $56,000 
B)  $66,000 
C)  $50,000 
D)  $54,000

Question 10

A significant advantage of issuing stock instead of debt is that payment of dividends is discretionary.

Accepted Answer

A) True 
 B)False

Question 11

Gosling, Inc., a calendar year, accrual basis corporation, reported $756,000 net income after tax on its financial statements prepared in accordance with GAAP. The corporation's financial records reveal the following information:
· Gosling earned $478,000 from a qualified domestic production activity.
· Gosling earned $3,500 on an investment in tax-exempt municipal bonds.
· Gosling's depreciation expense per books was $72,000, and its MACRS depreciation deduction was $105,000.
· Gosling recorded $58,000 of business meals and entertainment expense for book purposes.
· Gosling's federal income tax expense per books was $440,000.
a. Compute Gosling's taxable income and regular tax liability.
b. Prepare a Schedule M-1, page 5, Form 1120, reconciling Gosling's book and taxable income.

Accepted Answer

The answer of Gosling, Inc., a calendar year, accrual basis...

Question 12

In determining the incidence of the corporate income tax:

Accepted Answer

A)  Corporations may pass the tax burden onto consumers in the form of higher prices 
B)  Corporate shareholders may bear the burden of the corporate tax in the form of lower return on investment 
C)  Corporate employees may bear the burden of the corporate tax in the form of lower compensation 
D)  All of the above parties may bear the indirect burden of the corporate income tax

Question 13

Forward Inc.'s book income of $739,000 includes a net long-term capital loss of $42,000 and charitable contribution of $170,000. Taxable income shown on the Schedule M-1 would be

Accepted Answer

A)  $855,900 
B)  $951,000 
C)  $781,000 
D)  $909,000

Question 14

Sonic Corporation has a 35% marginal tax rate and received $10,000 of dividends from Roller, Inc., a U.S. corporation in which Sonic owns less than 2% of the outstanding stock. Sonic's effective tax rate on the Roller dividend is:

Accepted Answer

A)  35% 
B)  24.5% 
C)  10.5% 
D)  None of the above

Question 15

Which of the following is a primary legal characteristic of the corporate form of business?

Accepted Answer

A)  The management of the business is centered in a Board of Directors elected by the shareholders. 
B)  A shareholder must seek permission to sell his stock. 
C)  The life of the corporation will terminate when a majority of the shareholders die or cease to exist. 
D)  A shareholder is personally liable for the debts of the corporation.

Question 16

Corporations are rarely targeted in political debates over taxation.

Accepted Answer

A) True 
 B)False

Question 17

Franton Co., a calendar year, accrual basis corporation, reported $2,076,000 net income after tax on its 2015 financial statements prepared in accordance with GAAP. The corporation's financial records reveal the following information.
· Federal tax expense per books was $1,069,000.
· Franton received $22,400 of dividends from its investment in Microsoft and General Motors stock.
· Bad debt expense was $12,900, and write-offs of uncollectible accounts receivable totaled $16,300.
· Book depreciation was $110,890, and MACRS depreciation was $94,700.
· Franton paid a $50,000 fine to the City of Albany for illegal trash dumping.
Compute Franton's taxable income and regular tax liability.

Accepted Answer

The answer of Franton Co., a calendar year, accrual basis...

Question 18

Calliwell Corporation is a Colorado corporation engaged in the manufacture and sale of computer components. This year, it earned $2 million of net income from this qualified activity. Before the domestic production activities deduction, its taxable income is $2,100,000 and compensation paid to its U.S. workforce is $670,000. Its taxable income is:

Accepted Answer

A)  $1,820,000 
B)  $1,920,000 
C)  $1,260,000 
D)  $1,914,000

Question 19

The domestic production activities deduction is computed as a percentage of the greater of taxable income or net income from qualified production activities.

Accepted Answer

A) True 
 B)False

Question 20

Brace, Inc. owns 90% of West common stock. This year, Brace generated $50,000 operating income and received $10,000 dividends from West. Brace's taxable income is:

Accepted Answer

A)  $53,000 
B)  $58.000 
C)  $50,000 
D)  $52,000

Exam 11: The Corporate Taxpayer

Bisou Inc. made a $48,200 contribution to charity this year. Only $39,000 of the contribution was deductible. Bisou can carry the $9,200 nondeductible contribution back three years and forward five years.

If a corporation's depreciation expense for regular tax purposes is $32,000 and its depreciation expense for alternative minimum tax purposes is $28,000, such corporation will have a negative (decrease) depreciation adjustment for alternative minimum taxable income.

For tax years beginning after December 31, 2015, which of the following statements regarding corporate tax filing requirements is false?

The corporate characteristic of limited liability is more important to the shareholders than the characteristic of centralized management.

The domestic production activities deduction is a permanent book/tax difference.

The taxable income earned by a personal service corporation is taxed at a flat rate of 35%.

Silver Bullet Inc. reported the following for its current tax year: $\begin{array} { l r } \text { Regular taxable income } & \$ 200,000 \\\text { AMTI in excess of exemption } & 416,250\end{array}$ Compute Silver Bullet's total income tax liability.

Torquay Inc.'s 2015 taxable income was $9,782,200, and its tax liability was $3,325,948. Torquay's director of tax estimates that the corporation's 2016 taxable income will be $13,350,000. Use the corporate tax rate schedule to compute Torquay's 2016 estimated tax payment due on April 15, 2016.

Westside, Inc. owns 15% of Innsbrook's common stock. This year, Westside generated $50,000 operating income and received $20,000 dividends from Innsbrook. Westside's taxable income is:

A significant advantage of issuing stock instead of debt is that payment of dividends is discretionary.

In determining the incidence of the corporate income tax:

Forward Inc.'s book income of $739,000 includes a net long-term capital loss of $42,000 and charitable contribution of $170,000. Taxable income shown on the Schedule M-1 would be

Sonic Corporation has a 35% marginal tax rate and received $10,000 of dividends from Roller, Inc., a U.S. corporation in which Sonic owns less than 2% of the outstanding stock. Sonic's effective tax rate on the Roller dividend is:

Which of the following is a primary legal characteristic of the corporate form of business?

Corporations are rarely targeted in political debates over taxation.

The domestic production activities deduction is computed as a percentage of the greater of taxable income or net income from qualified production activities.

Brace, Inc. owns 90% of West common stock. This year, Brace generated $50,000 operating income and received $10,000 dividends from West. Brace's taxable income is: