Question 1

Torquay Inc.'s 2011 taxable income was $9,782,200, and its tax liability was $3,325,948. Torquay's director of tax estimates that the corporation's 2012 taxable income will be $13,350,000. Use the corporate tax rate schedule to compute Torquay's 2011 estimated tax payment due on April 15, 2012.

Accepted Answer

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

Question 2

For a consolidated group of corporations, Schedule M-3 reconciles worldwide financial statement net income to the financial statement net income of those corporations permitted to be included in the U.S. consolidated tax return group.

Accepted Answer

A) True 
 B)False

Question 3

John's, Inc. manufactures and sells fine furniture. What is John's regular tax liability if it had taxable income of $40,000,000?

Accepted Answer

A)  $14,000,000 
B)  $13,600,000 
C)  $15,600,000 
D)  $16,000,000

Question 4

Mandrake, Inc. has book income of $569,300. Its income includes a $50,700 bad debt expense, determined by the allowance method. Actual write offs this year were $48,000. Based only on this information, compute Mandrake's taxable income.

Accepted Answer

A)  $569,300 
B)  $572,000 
C)  $566,600 
D)  $528,600

Question 5

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 6

Loda Inc. made an $8,300 nondeductible charitable contribution and a $2,000 nondeductible political contribution this year. Which of the following statements is true?

Accepted Answer

A)  Both nondeductible contributions are permanent book/tax differences. 
B)  Both nondeductible contributions are temporary book/tax differences. 
C)  The nondeductible charitable contribution is a temporary book/tax difference. The nondeductible political contribution is a permanent book/tax difference. 
D)  The nondeductible charitable contribution is a permanent book/tax difference. The nondeductible political contribution is a temporary book/tax difference.

Question 7

Aaron, Inc. is a nonprofit corporation that collects and distributes food for needy families. Aaron, Inc. also operates a small grocery store for profit. Which of the following statements is true?

Accepted Answer

A)  The income from the collection and distribution of food and the income from grocery store are taxable. 
B)  No income from either of the activities is taxable. 
C)  Only the income from the collection and distribution of food is taxable. 
D)  Only the income from the grocery store is taxable.

Question 8

The corporate alternative minimum tax is designed to insure that corporations with substantial economic income will pay their fair share of the federal tax burden.

Accepted Answer

A) True 
 B)False

Question 9

Corporations with more than $1 million taxable income must pay 100% of their current federal income tax liability in the form of quarterly estimate payments to avoid an underpayment penalty.

Accepted Answer

A) True 
 B)False

Question 10

A corporation that owns more than $10 million of total assets uses which schedule to reconcile book income to taxable income?

Accepted Answer

A)  Schedule M-1 
B)  Schedule M-2 
C)  Schedule M-3 
D)  Schedule M-4

Question 11

The burden of corporate taxation is often borne by corporate shareholders, customers, employees, and suppliers.

Accepted Answer

A) True 
 B)False

Question 12

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

Accepted Answer

A) True 
 B)False

Question 13

Wave Corporation owns 90% of the stock of Surf, Inc. Each corporation reports the following separate items for the current tax year:  Compute consolidated taxable income if Wave and Surf file a consolidated federal income tax return:

Accepted Answer

A)  $400,000 
B)  $395,000 
C)  $410,000 
D)  $500,000

Question 14

Silver Bullet Inc. reported the following for its current tax year:  Compute Silver Bullet's total income tax liability.

Accepted Answer

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

Question 15

Palm Corporation has book income of $424,000. Book income reflects $200,000 income tax expense and $55,000 depreciation expense. Tax depreciation expense computed under MACRS is $65,000. Palm received $25,000 of prepaid rent not included in book income. Based only on these items, compute Palm's taxable income.

Accepted Answer

A)  $639,000 
B)  $609,000 
C)  $659,000 
D)  $589,000

Question 16

Borough, Inc. is entitled to a rehabilitation credit of $500,000 for its current tax year. The corporation's regular tax liability is $450,000. No estimated tax payments have been made. Which of the following statements is true?

Accepted Answer

A)  The corporation should receive a tax refund for the current year. 
B)  The portion of the rehabilitation credit that cannot be used this year will be lost. 
C)  The credit would have been higher if the company had restored a certified historic structure. 
D)  The credit is available for restoration of a building that is at least ten years old.

Question 17

Aloha, Inc. had the following results for its first two years of operation:  Which of the following statements is true?

Accepted Answer

A)  There is no AMT credit carryover from 2008 to 2009. 
B)  There is an AMT credit carryover from 2008 to 2009. 
C)  There is an AMT credit carryover from 2009 to 2010. 
D)  There is an AMT credit carryback from 2009 to 2008.

Question 18

A nonprofit corporation may incur a federal income tax if it has unrelated business income.

Accepted Answer

A) True 
 B)False

Question 19

A corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

Accepted Answer

A) True 
 B)False

Question 20

The stock of closely held corporations is typically restricted as to transferability by some type of buy-sell agreement.

Accepted Answer

A) True 
 B)False

Exam 11: The Corporate Taxpayer

Torquay Inc.'s 2011 taxable income was $9,782,200, and its tax liability was $3,325,948. Torquay's director of tax estimates that the corporation's 2012 taxable income will be $13,350,000. Use the corporate tax rate schedule to compute Torquay's 2011 estimated tax payment due on April 15, 2012.

For a consolidated group of corporations, Schedule M-3 reconciles worldwide financial statement net income to the financial statement net income of those corporations permitted to be included in the U.S. consolidated tax return group.

John's, Inc. manufactures and sells fine furniture. What is John's regular tax liability if it had taxable income of $40,000,000?

Mandrake, Inc. has book income of $569,300. Its income includes a $50,700 bad debt expense, determined by the allowance method. Actual write offs this year were $48,000. Based only on this information, compute Mandrake's taxable income.

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.

Loda Inc. made an $8,300 nondeductible charitable contribution and a $2,000 nondeductible political contribution this year. Which of the following statements is true?

Aaron, Inc. is a nonprofit corporation that collects and distributes food for needy families. Aaron, Inc. also operates a small grocery store for profit. Which of the following statements is true?

The corporate alternative minimum tax is designed to insure that corporations with substantial economic income will pay their fair share of the federal tax burden.

Corporations with more than $1 million taxable income must pay 100% of their current federal income tax liability in the form of quarterly estimate payments to avoid an underpayment penalty.

A corporation that owns more than $10 million of total assets uses which schedule to reconcile book income to taxable income?

The burden of corporate taxation is often borne by corporate shareholders, customers, employees, and suppliers.

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

Wave Corporation owns 90% of the stock of Surf, Inc. Each corporation reports the following separate items for the current tax year: Compute consolidated taxable income if Wave and Surf file a consolidated federal income tax return:

Silver Bullet Inc. reported the following for its current tax year: Compute Silver Bullet's total income tax liability.

Borough, Inc. is entitled to a rehabilitation credit of $500,000 for its current tax year. The corporation's regular tax liability is $450,000. No estimated tax payments have been made. Which of the following statements is true?

Aloha, Inc. had the following results for its first two years of operation: Which of the following statements is true?

A nonprofit corporation may incur a federal income tax if it has unrelated business income.

A corporate taxpayer would prefer a $50,000 deduction to a $50,000 credit.

The stock of closely held corporations is typically restricted as to transferability by some type of buy-sell agreement.