Question 1

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 2

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 3

Doctors Inc. is a corporation owned by four physicians in which they operate their medical practice. For the current year, Doctors Inc. had taxable income of $135,000. What is its regular tax liability?

Accepted Answer

A)  $32,450 
B)  $35,900 
C)  $45,900 
D)  $47,250

Question 4

Rogers, Inc. owns 12% of Lampe Corporation's voting common stock. During the current year, Rogers generated $50,000 operating income and received $8,000 dividends from Lampe. Only $1,600 of the dividend is taxable.

Accepted Answer

A) True 
 B)False

Question 5

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 6

Thunder, Inc. has invested in the stock of several corporations and has $500,000 operating income before dividends.  Calculate Thunder's dividends-received deduction and taxable income:

Accepted Answer

A)  DRD, $203,300; taxable income, $296,700 
B)  DRD, $169,640; taxable income, $533,660 
C)  DRD, $183,640; taxable income, $519,660 
D)  DRD, $169,640; taxable income, $330,360

Question 7

This year, Sonoma Corporation received the following dividends:
  Before considering the above dividends, Sonoma has taxable income of $550,000. Calculate Sonoma's allowable dividends-received deduction and taxable income.

Accepted Answer

The answer of This year, Sonoma Corporation received the following...

Question 8

The federal tax law considers the member corporations of an affiliated group to be a single entity for federal tax purposes. An example of this treatment is the requirement to share the 15% tax bracket.

Accepted Answer

A) True 
 B)False

Question 9

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 10

In terms of dispersal of ownership, corporations are classified as either closely held or publicly held.

Accepted Answer

A) True 
 B)False

Question 11

Sunny Vale Co. reported the following for the current tax year:  Compute Sunny Vale's total income tax liability.

Accepted Answer

A)  $23,250 
B)  $950 
C)  $24,200 
D)  $47,450

Question 12

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 third month following the close of the taxable year. 
B)  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 fourth month following the close of the taxable year.

Question 13

Assuming that the corporation has a 34% MTR, which of the following statements is true?

Accepted Answer

A)  Jacky, Inc. borrowed $500,000 and paid interest of $48,000; the after-tax cost of the interest was $31,680. 
B)  Jacky, Inc issued 1,000 shares of 7%, $100 par preferred stock for $100,000. The after-tax cost of the $7,000 dividend paid was $4,620. 
C)  Jacky, Inc issued 1,000 shares of 7%, $100 par preferred stock for $100. The after-tax cost of the $7,000 dividend paid was $2,380. 
D)  Jacky, Inc. borrowed $500,000 and paid interest of $48,000; the after-tax cost of the interest was $16,320.

Question 14

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 15

Torquay Inc.'s 2014 taxable income was $9,782,200, and its tax liability was $3,325,948. Torquay's director of tax estimates that the corporation's 2015 taxable income will be $13,350,000. Use the corporate tax rate schedule to compute Torquay's 2015 estimated tax payment due on April 15, 2015.

Accepted Answer

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

Question 16

Lexington Associates, Inc. is a personal service corporation. This year, Lexington reported $75,000 of taxable income. Which of the following statements regarding Lexington's regular tax liability is true?

Accepted Answer

A)  Regular tax liability will be less than it would have been if Lexington were not a personal service corporation. 
B)  Regular tax liability will be greater than it would have been if Lexington were not a personal service corporation. 
C)  Regular tax liability will be the same as it would have been if Lexington were not a personal service corporation. 
D)  Regular tax liability will be zero.

Question 17

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 18

The corporate alternative minimum tax rate is 26% of AMTI in excess of the AMT exemption.

Accepted Answer

A) True 
 B)False

Question 19

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

Accepted Answer

A) True 
 B)False

Question 20

Which of the following items is not used to compute the Domestic Production Activities Deduction?

Accepted Answer

A)  Overseas sales of domestic products 
B)  Taxable income 
C)  Compensation paid to U.S. workforce 
D)  Net income from qualified domestic production activity

Exam 11: The Corporate Taxpayer

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.

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:

Doctors Inc. is a corporation owned by four physicians in which they operate their medical practice. For the current year, Doctors Inc. had taxable income of $135,000. What is its regular tax liability?

Rogers, Inc. owns 12% of Lampe Corporation's voting common stock. During the current year, Rogers generated $50,000 operating income and received $8,000 dividends from Lampe. Only $1,600 of the dividend is taxable.

Thunder, Inc. has invested in the stock of several corporations and has $500,000 operating income before dividends. Calculate Thunder's dividends-received deduction and taxable income:

This year, Sonoma Corporation received the following dividends: Before considering the above dividends, Sonoma has taxable income of $550,000. Calculate Sonoma's allowable dividends-received deduction and taxable income.

The federal tax law considers the member corporations of an affiliated group to be a single entity for federal tax purposes. An example of this treatment is the requirement to share the 15% tax bracket.

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

In terms of dispersal of ownership, corporations are classified as either closely held or publicly held.

Sunny Vale Co. reported the following for the current tax year: Compute Sunny Vale's total income tax liability.

Which of the following statements regarding corporate tax filing requirements is false?

Assuming that the corporation has a 34% MTR, which of the following statements is true?

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?

Torquay Inc.'s 2014 taxable income was $9,782,200, and its tax liability was $3,325,948. Torquay's director of tax estimates that the corporation's 2015 taxable income will be $13,350,000. Use the corporate tax rate schedule to compute Torquay's 2015 estimated tax payment due on April 15, 2015.

Lexington Associates, Inc. is a personal service corporation. This year, Lexington reported $75,000 of taxable income. Which of the following statements regarding Lexington's regular tax liability is true?

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

The corporate alternative minimum tax rate is 26% of AMTI in excess of the AMT exemption.

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

Which of the following items is not used to compute the Domestic Production Activities Deduction?