ACC 317 WK 5 Midterm Exam
\n1. Tomas owns a sole proprietorship, and Lucy is the sole shareholder
\n of a C corporation. In the current year both businesses make a net
\nprofit of $60,000. Neither business distributes any funds to the owners
\n in the year. For the current year, Tomas must report $60,000 of income
\non his individual tax return, but Lucy is not required to report any
\nincome from the corporation on her individual tax return. True False<\/p>\n
2. Rose is a 50% partner in Wren Partnership. During the year, Wren
\nearned net profit of $100,000 ($210,000 gross income \u00e2\u0080\u0093 $110,000
\noperating expenses) and distributed $20,000 to each partner. Rose must
\nreport Wren Partnership profit of $20,000 on her Federal income tax
\nreturn. True False<\/p>\n
3. Rajib is the sole shareholder of Robin Corporation, a calendar
\nyear S corporation. Robin earned net profit of $350,000 ($520,000 gross
\nincome \u00e2\u0080\u0093 $170,000 operating expenses) and distributed $80,000 to Rajib.
\nRajib must report Robin Corporation profit of $350,000 on his Federal
\nincome tax return. True False<\/p>\n
4. Donald owns a 60% interest in a partnership that earned $230,000
\nin the current year. He also owns 60% of the stock in a C corporation
\nthat earned $230,000 during the year. Donald received $50,000 in
\ndistributions from each of the two entities during the year. With
\nrespect to this information, Donald must report $188,000 of income on
\nhis individual income tax return for the year. True False<\/p>\n
5. Quail Corporation is a C corporation with net income of $125,000
\nduring the current year. If Quail paid dividends of $25,000 to its
\nshareholders, the corporation must pay tax on $100,000 of net income.
\nShareholders must report the $25,000 of dividends as income. True False<\/p>\n
6. Eagle Company, a partnership, had a short-term capital loss of
\n$10,000 during the year. Aaron, who owns 25% of Eagle, will report
\n$2,500 of Eagle\u00e2\u0080\u0099s short-term capital loss on his individual tax return. True False<\/p>\n
7. Katherine, the sole shareholder of Purple Corporation, a calendar
\nyear C corporation, has the corporation pay her a salary of $450,000 in
\nthe current year. The Tax Court has held that $150,000 represents
\nunreasonable compensation. Purple Corporation\u00e2\u0080\u0099s taxable income is
\nunaffected by the Tax Court\u00e2\u0080\u0099s determination. True False<\/p>\n
8. Double taxation of corporate income results because dividend
\ndistributions are included in a shareholder\u00e2\u0080\u0099s gross income but are not
\ndeductible by the corporation. True False<\/p>\n
9. Jake, the sole shareholder of Peach Corporation, a C corporation,
\nhas the corporation pay him $100,000. For tax purposes, Jake would
\nprefer to have the payment treated as salary instead of dividend. True False<\/p>\n
10. Thrush Corporation files Form 1120, which reports taxable income of $200,000. The corporation\u00e2\u0080\u0099s tax is $56,250. True False<\/p>\n
11. The corporate marginal income tax rates range from 10% to 35%,
\nwhile the individual marginal income tax rates range from 15% to 39%. True False<\/p>\n
12. Employment taxes apply to all entity forms of operating a
\nbusiness. As a result, employment taxes are a neutral factor in
\nselecting the most tax effective form of operating a business. True False<\/p>\n
13. Under the \u00e2\u0080\u009ccheck-the-box\u00e2\u0080\u009d Regulations, a two-owner LLC that fails
\n to elect to be to treated as a corporation will be taxed as a sole
\nproprietorship. True False<\/p>\n
14. As a general rule, a personal service corporation (PSC) must use a calendar year as its accounting period. True False<\/p>\n
15. A calendar year C corporation with average annual gross receipts
\nof $5 million or less must use the cash method of accounting. True False<\/p>\n
16. On December 31, 2012, Lavender, Inc., an accrual basis C
\ncorporation, accrues a $90,000 bonus to Barry, its vice president and a
\n70% shareholder. Lavender pays the bonus to Barry, who is a cash basis
\ntaxpayer, on March 15, 2013. Lavender can deduct the bonus in 2013, the
\nyear in which it is included in Barry\u00e2\u0080\u0099s gross income. True False<\/p>\n
17. Azure Corporation, a C corporation, had a long-term capital gain
\nof $50,000 in the current year. The maximum amount of tax applicable to
\n the capital gain is $7,500 ($50,000 \u00c2\u00b4 15%). True False<\/p>\n
18. Albatross, a C corporation, had $140,000 net income from
\noperations and a $25,000 short-term capital loss in the current year.
\nAlbatross Corporation\u00e2\u0080\u0099s taxable income is $140,000. True False<\/p>\n
19. If a C corporation uses straight-line depreciation on real estate
\n (\u00c2\u00a7 1250 property), no gain on the sale of the property will be
\nrecaptured as ordinary income. True False<\/p>\n
20. The passive loss rules apply to closely held C corporations and to personal service corporations but not to S corporations. True False<\/p>\n
21. Peach Corporation had $210,000 of active income, $45,000 of
\nportfolio income, and a $230,000 passive loss during the current year.
\nIf Peach is a closely held C corporation that is not a PSC, it can
\ndeduct $230,000 of the passive loss in the year. True False<\/p>\n
22. On December 20, 2012, the directors of Quail Corporation (an
\naccrual basis, calendar year taxpayer) authorized a cash donation of
\n$5,000 to the American Cancer Society, a qualified charity. The
\npayment, which is made on April 10, 2013, may be claimed as a deduction
\nfor tax year 2012. True False<\/p>\n
23. In the current year, Oriole Corporation donated a painting worth
\n$30,000 to the Texas Art Museum, a qualified public charity. The museum
\nincluded the painting in its permanent collection. Oriole Corporation
\npurchased the painting 5 years ago for $10,000. Oriole\u00e2\u0080\u0099s charitable
\ncontribution deduction is $30,000 (ignoring the taxable income
\nlimitation). True False<\/p>\n
24. Crow Corporation, a C corporation, donated scientific property
\n(basis of $30,000, fair market value of $50,000) to State University, a
\nqualified charitable organization, to be used in research. Crow had held
\n the property for four months as inventory. Crow Corporation may deduct
\n $50,000 for the charitable contribution (ignoring the taxable income
\nlimitation). True False<\/p>\n
25. Heron Corporation, a calendar year C corporation, had an excess
\ncharitable contribution for 2011 of $5,000. In 2012, Heron made a
\nfurther charitable contribution of $20,000. Heron\u00e2\u0080\u0099s 2012 deduction is
\nlimited to $15,000 (10% of taxable income). The current year\u00e2\u0080\u0099s
\ncontribution must be applied first against the $15,000 limitation. True False<\/p>\n
26. For a corporation in 2012, the domestic production activities
\ndeduction is equal to 9% of the higher of (1) qualified production
\nactivities income or (2) taxable income. However, the deduction cannot
\nexceed 50% of the W-2 wages related to qualified production activities
\nincome. True False<\/p>\n
27. Generally, corporate net operating loss can be carried back 3
\nyears and forward 5 years to offset taxable income for those years. True False<\/p>\n
28. Azul Corporation, a calendar year C corporation, received a
\ndividend of $50,000 from Naranja Corporation. Azul owns 10% of the
\nNaranja Corporation stock. Assuming it is not subject to the taxable
\nincome limitation, Azul\u00e2\u0080\u0099s dividends received deduction is $35,000. True False<\/p>\n
29. Because of the taxable income limitation, no dividends received
\ndeduction is allowed if a corporation has an NOL for the current taxable
\n year. True False<\/p>\n
30. No dividends received deduction is allowed unless the corporation has held the stock for more than 90 days. True False<\/p>\n
31. Black Corporation, an accrual basis taxpayer, was formed and
\nbegan operations on February 1, 2012. During its first year of
\noperations (February 1 \u00e2\u0080\u0093 December 31, 2012), Black incurred the
\nfollowing expenses: fee paid to state of incorporation of $2,000,
\naccounting and legal services incident to organization of $9,000, and
\nexpenses related to the printing and sale of stock certificates of
\n$10,000. Black has $11,000 of qualified organizational expenditures
\nthat it may elect to amortize. True False<\/p>\n
32. Lilac Corporation incurred $4,700 of legal and accounting fees
\nassociated with its incorporation. The $4,700 is deductible as startup
\nexpenditures on Lilac\u00e2\u0080\u0099s tax return for the year in which it begins
\nbusiness. True False<\/p>\n
33. A personal service corporation with taxable income of $100,000 will have a tax liability of $22,250. True False<\/p>\n
34. Ed, an individual, incorporates two separate businesses that he
\nowns by establishing two new corporations. Each corporation generates
\ntaxable income of $50,000. Each corporation will have a tax liability of
\n $7,500. True False<\/p>\n
35. A calendar year C corporation can receive an automatic 6-month
\nextension to file its 2012 corporate return (Form 1120) by filing Form
\n7004 by March 15, 2013. True False<\/p>\n
36. The due date (not including extensions) for filing a 2012 Federal
\n income tax return for a calendar year C corporation (Form 1120) is
\nApril 15, 2013. True False<\/p>\n
37. Schedule M-1 is used to reconcile net income as computed for
\nfinancial accounting purposes with taxable income reported on the
\ncorporation\u00e2\u0080\u0099s income tax return. True False<\/p>\n
38. An expense that is deducted in computing net income per books but
\n not deductible in computing taxable income is a subtraction item on
\nSchedule M-1. True False<\/p>\n
39. On December 31, 2012, Flamingo, Inc., a calendar year, accrual
\nmethod C corporation, accrues a bonus of $50,000 to its president (a
\ncash basis taxpayer), who owns 75% of the corporation\u00e2\u0080\u0099s outstanding
\nstock. The $50,000 bonus is paid to the president on February 1, 2013.
\n For Flamingo\u00e2\u0080\u0099s 2012 Form 1120, the $50,000 bonus will be a subtraction
\nitem on Schedule M-1. True False<\/p>\n
40. Canary Corporation, which sustained a $5,000 net capital loss
\nduring the year, will enter $5,000 as a addition item on Schedule M-1. True False<\/p>\n
41. Schedule M-2 is used to reconcile unappropriated retained
\nearnings at the beginning of the year with unappropriated retained
\nearnings at the end of the year. True False<\/p>\n
42. A corporation with $5 million or more in assets must file Schedule M-3 (instead of Schedule M-1). True False<\/p>\n
43. Schedule M-3 is similar to Schedule M-1 in that the form is
\ndesigned to reconcile net income per books with taxable income.
\nHowever, an objective of Schedule M-3 is more transparency between
\nfinancial statements and tax returns than that provided by Schedule
\nM-1. True False<\/p>\n
44. Juanita owns 60% of the stock in a C corporation that had a
\nprofit of $200,000 in 2012. Carlos owns a 60% interest in a partnership
\n that had a profit of $200,000 during the year. The corporation
\ndistributed $45,000 to Juanita, and the partnership distributed $45,000
\nto Carlos. Which of the following statements relating to 2012 is incorrect? A. Juanita must report $120,000 of income from the corporation. B. The corporation must pay corporate tax on $200,000 of income. C. Carlos must report $120,000 of income from the partnership. D. The partnership is not subject to a Federal entity-level income tax. E. None of the above.<\/p>\n
45. Bjorn owns a 60% interest in an S corporation that earned
\n$150,000 in 2012. He also owns 60% of the stock in a C corporation that
\nearned $150,000 during the year. The S corporation distributed $30,000
\nto Bjorn and the C corporation paid dividends of $30,000 to Bjorn. How
\nmuch income must Bjorn report from these businesses? A. $0 income from the S corporation and $30,000 income from the C corporation. B. $30,000 income from the S corporation and $30,000 of dividend income from the C corporation. C. $90,000 income from the S corporation and $0 income from the C corporation. D. $90,000 income from the S corporation and $30,000 income from the C corporation. E. None of the above.<\/p>\n","protected":false},"excerpt":{"rendered":"
ACC 317 WK 5 Midterm Exam 1. Tomas owns a sole proprietorship, and Lucy is the sole shareholder of a C corporation. In the current\u2026<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[8827,10099,10540,10536,10892,10538,10539,10537,10891],"tags":[10549,10616,10615,7687,10627,8857,10552,10295,10548,10622,8907],"class_list":["post-130157","post","type-post","status-publish","format-standard","hentry","category-australia-essays","category-buy-essay","category-cheap-essay-writers","category-get-assignments-done","category-page-paper","category-phd-essay-writers","category-research-paper-writing-service-for-any-topic","category-study-bay-essay","category-write-my-assignment-ireland","tag-ai-plagiarism-free-essay-writing-tool","tag-australian-best-tutors","tag-best-trans-tutors","tag-buy-essay-uk","tag-cheap-dissertation-writer","tag-help-with-writing-an-essay","tag-help-write-my-paper-ai-free","tag-homework-for-you","tag-online-essay-writers","tag-phd-essays","tag-write-my-essay-for-me"],"_links":{"self":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/130157","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/comments?post=130157"}],"version-history":[{"count":0,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/posts\/130157\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/media?parent=130157"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/categories?post=130157"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.studyproessays.com\/help\/wp-json\/wp\/v2\/tags?post=130157"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}