Question : 31. Which of the following companies taxed at a flat rate : 1313623

 

 

31. Which of the following companies is taxed at a flat rate of 35 percent?

a. An auto parts manufacturing corporation with taxable income of $73,000.

b. A consulting corporation of owner-employee CPAs with taxable income of $1,000,000.

c. A family-owned shoe store with earnings of $224,000 in 2013.

d. All of the above are taxed at a flat rate of 35 percent.

 

ANSWER:  b

POINTS:  1

QUESTION TYPE:  Multiple Choice

HAS VARIABLES:  False

LEARNING OBJECTIVES:  ITF.WABG.15.LO:11-01 – LO:11-01

 

 

32. In 2014, Apricot Corporation had taxable income of $120,000. Included in taxable income was a $10,000 capital gain. The $120,000 of taxable income does not include a $15,000 capital loss carryforward available from the previous year. What is Apricot Corporation’s 2014 income tax liability before any tax credits?

a. $24,200

b. $26,150

c. $28,550

d. $30,050

e. None of the above

 

ANSWER:  b

RATIONALE:  $22,250 + 39% × ($120,000 – $10,000 – $100,000)

POINTS:  1

QUESTION TYPE:  Multiple Choice

HAS VARIABLES:  False

LEARNING OBJECTIVES:  ITF.WABG.15.LO:11-01 – LO:11-01ITF.WABG.15.LO:11-02 – LO:11-02

NOTES:  Additional tables, rates or other schedules may be required to assist the student in completing this test question.

 

 

33. Which of the following statements is true of corporations?

a. Income of all corporations is taxed in the same way that income of partnerships is taxed.

b. A corporation’s charitable contribution deduction is limited to 25 percent of the corporation’s taxable income.

c. Capital losses of a corporation may be deducted from ordinary income, subject to an annual limitation.

d. If a corporation has a long-term capital loss that is carried back, it is treated as a short-term capital loss.

e. A corporation may deduct organizational expenditures as they are incurred.

 

ANSWER:  d

POINTS:  1

QUESTION TYPE:  Multiple Choice

HAS VARIABLES:  False

LEARNING OBJECTIVES:  ITF.WABG.15.LO:11-01 – LO:11-01ITF.WABG.15.LO:11-02 – LO:11-02ITF.WABG.15.LO:11-03 – LO:11-03

 

 

34. Which of the following is true with respect to capital gains and losses of a corporation?

a. A corporation can offset ordinary income with capital losses.

b. A corporation pays 15 percent long-term capital gains rate, just like an individual.

c. A corporation can carry a capital loss back 5 years.

d. A corporation can carry a capital loss forward 5 years.

 

ANSWER:  d

POINTS:  1

QUESTION TYPE:  Multiple Choice

HAS VARIABLES:  False

LEARNING OBJECTIVES:  ITF.WABG.15.LO:11-02 – LO:11-02

 

 

35. For 2014, the Beech Corporation has net income on its books of $60,000, including the following items: 

Net capital losses$10,000

Federal income tax expense$25,000

Federal tax depreciation exceeds the depreciation deducted on the books by $5,000. What is the corporation’s taxable income?

a. $66,000

b. $85,000

c. $90,000

d. $103,000

e. None of the above

 

ANSWER:  c

RATIONALE:  $60,000 + $10,000 + $25,000 – $5,000

POINTS:  1

QUESTION TYPE:  Multiple Choice

HAS VARIABLES:  False

LEARNING OBJECTIVES:  ITF.WABG.15.LO:11-02 – LO:11-02ITF.WABG.15.LO:11-04 – LO:11-04

 

 

36. The Nandina Corporation was formed and began operations on July 1, 2014, and incurred the following expenses during the year: 

State fees for incorporation$ 800

Legal and accounting fees incident to organization$1,700

Legal fees for the issuance of stock$ 600

Temporary directors’ fees$1,100

If the corporation chooses not to expense but rather amortizes organizational costs over 180 months, what is the amount of its amortization expense for 2014?

a. $20

b. $120

c. $240

d. $3,600

e. None of the above

 

ANSWER:  b

RATIONALE:  ($800 + $1,700 + $1,100) / 180 months × 6 months

POINTS:  1

QUESTION TYPE:  Multiple Choice

HAS VARIABLES:  False

LEARNING OBJECTIVES:  ITF.WABG.15.LO:11-03 – LO:11-03

 

 

37. ABC Company owns 40 percent of JMT Company and 95 percent of DEM Company. JMT pays a$80,000 dividend to ABC and DEM pays a $40,000 dividend to ABC in 2014. Assuming that ABC has $1,000,000 of taxable income, calculate ABC’s dividends received deduction for 2014.

a. $96,000

b. $104,000

c. $120,000

d. $140,000

e. None of the above is correct

 

ANSWER:  b

RATIONALE:  80% × $80,000 + $40,000

POINTS:  1

QUESTION TYPE:  Multiple Choice

HAS VARIABLES:  False

LEARNING OBJECTIVES:  ITF.WABG.15.LO:11-03 – LO:11-03

 

 

38. The F. Repens Corporation has taxable income of $250,000 for 2014, including dividends of $50,000 received from 30 percent-owned domestic corporations. How much is the F. Repens Corporation’s dividends received deduction for 2014?

a. $0

b. $40,000

c. $50,000

d. $170,000

e. None of the above

 

ANSWER:  b

RATIONALE:  80% × $50,000

POINTS:  1

QUESTION TYPE:  Multiple Choice

HAS VARIABLES:  False

LEARNING OBJECTIVES:  ITF.WABG.15.LO:11-03 – LO:11-03

 

 

39. The Bay Fig Corporation has $350,000 of taxable income from operations for 2014, and dividends of $100,000 received from 10 percent-owned domestic corporations. How much is the Bay Fig Corporation’s dividends received deduction for 2014?

a. $35,000

b. $40,000

c. $70,000

d. $80,000

e. None of the above

 

ANSWER:  c

RATIONALE:  70% × $100,000

POINTS:  1

QUESTION TYPE:  Multiple Choice

HAS VARIABLES:  False

LEARNING OBJECTIVES:  ITF.WABG.15.LO:11-03 – LO:11-03

 

 

40. In 2014, Parvifolia, Inc. had $400,000 of revenue from operations and $160,000 of dividends from non-affiliated 15 percent-owned domestic corporations. The corporation’s deductible operating expenses totaled $410,000. What is Parvifolia, Inc.’s dividends received deduction for 2014?

a. $105,000

b. $112,000

c. $120,000

d. $128,000

e. None of the above

 

ANSWER:  a

RATIONALE:  Lesser of 70% × $160,000 or 70% × ($400,000 + $160,000 – $410,000)

POINTS:  1

QUESTION TYPE:  Multiple Choice

HAS VARIABLES:  False

LEARNING OBJECTIVES:  ITF.WABG.15.LO:11-03 – LO:11-03