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Chapter 16 Corporate Operations

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Question;Chapter 16;Corporate Operations;True / False Questions;1. In;general, a corporation can elect to use either the accrual or cash method of;accounting no matter how large the corporation.;True False;2. Corporations;calculate adjusted gross income (AGI) in the same way as individuals.;True False;3. Corporations;have a larger standard deduction than individual taxpayers because they;generally have higher revenues.;True False;4. Large;corporations are allowed to use the cash method of accounting for at least the;first two years of their existence.;True False;5. Although;a corporation may report a temporary book-tax difference for an item of income;or deduction for a given year, over the long term the total amount of income or;deduction it reports with respect to that item will be the same for both book;and tax purposes.;True False;6. An;unfavorable temporary book-tax difference is so named because it causes taxable;income to decrease relative to book income.;True False;7. Income;that is included in book income, but excluded from taxable income, results in a;favorable, permanent book-tax difference.;True False;8. Federal;income tax expense reported on a corporation's books generates a temporary;book-tax difference for Schedule M-3 purposes.;True False;9. For a;corporation, goodwill created in an asset acquisition generally leads to;temporary book-tax differences.;True False;10. In a given;year, Adams Corporation has goodwill impairment in excess of the allowable;amortization for tax purposes. It has a favorable temporary book-tax difference;for that year.;True False;11. For;incentive stock options granted when ASC 718 (a codification of FAS 123R);applies, the value of the options that vest in a given year always creates a;permanent, unfavorable book-tax difference.;True False;12. For tax;purposes, companies using nonqualified stock options deduct expenses in the;year the options are exercised.;True False;13. A;nonqualified stock option will create a permanent book-tax difference in a;given year if it vests during the year but is exercised in a later year.;True False;14. In;contrast to an individual, a corporation may deduct the entire amount of a net;capital loss.;True False;15. A;corporation may carry a net capital loss forward five years to offset capital;gains in future years but it may not carry a net capital loss back to offset;capital gains in previous years.;True False;16. A;corporation may carry a net capital loss back two years and forward 20 years.;True False;17. A;corporation may carry a net capital loss back three years and forward five;years.;True False;18. Corporations;can carry net operating loss sustained in 2014 back two years and forward 20;years.;True False;19. Bingo;Corporation incurred a net operating loss in 2014. If it carries the loss back;it must first carry the loss back to offset its 2013 taxable income and then it;carries any remaining loss back to offset its 2012 taxable income.;True False;20. Net;operating losses generally create permanent book-tax differences.;True False;21. Net;capital loss carryovers but not carrybacks are deductible against capital gains;in determining a corporation's net operating loss for the year.;True False;22. Accrual-method;corporations cannot deduct charitable contributions until they actually make;payment to the charity.;True False;23. GenerUs;Inc.'s board of directors approved a charitable cash contribution to FoodBank;a qualified non-profit organization, in November of 2014. GenerUs made payment;to FoodBank on February 2, 2015. GenerUs Inc. (a calendar-year corporation) may;claim a deduction for the contribution on its 2014 tax return.;True False;24. NOL and;capital loss carryovers are deductible in calculating the charitable;contribution limit modified taxable income, while NOL and capital loss;carrybacks are not.;True False;25. Corporations;may carry excess charitable contributions forward five years, but they may not;carry them back.;True False;26. A;corporation generally will report a favorable, temporary book-tax difference;when it deducts a charitable contribution carryover.;True False;27. Corporations;are not allowed to deduct charitable contributions in excess of 10% of the;corporation's taxable income (before the charitable contribution and certain;other deductions).;True False;28. The;dividends received deduction is designed to mitigate the extent to which;corporate earnings are subject to more than two levels of taxation.;True False;29. Corporations;compute their dividends received deduction by multiplying the dividend amount;by 10%, 50%, or 100% depending on their ownership in the distributing;corporation's stock.;True False;30. The;dividends received deduction cannot cause a net operating loss. The deduction;can reduce income to zero but not below zero.;True False;31. The;dividends received deduction is subject to a limitation based on modified;taxable income.;True False;32. Taxable;income of the most profitable corporations is subject to a flat 35% tax rate.;True False;33. Controlled;group provisions in the tax law prevent taxpayers from splitting a corporation;into several smaller corporations to take advantage of low marginal corporate;tax rates at low levels of income.;True False;34. Three;brothers each own 20% of the stock in three corporations. Because no single;brother owns more than 50% of a corporation, the tax law would not treat the;corporations as a controlled group.;True False;35. A C;corporation reports its taxable income or loss on Form 1065.;True False;36. Schedule;M-1 reconciles from book income to bottom line taxable income (the taxable;income that is applied to the tax rates to determine the corporation's gross;tax liability).;True False;37. Both;Schedules M-1 and M-3 require taxpayers to identify book-tax differences as;either temporary or permanent.;True False;38. An;affiliated group must file a consolidated tax return.;True False;39. The rules;for consolidated reporting for financial statement purposes are the same as the;rules for consolidated reporting for tax purposes.;True False;40. Calendar-year;corporations that request an extension for filing their tax returns will have a;tax return due date of September 15.;True False;41. Volos;Company (a calendar-year corporation) began operations in March of 2012 and was;not profitable through December of 2013. Volos has been profitable for the;first quarter of 2014 and is trying to determine its first quarter estimated;tax payment. It will have no estimated tax payment requirement in 2014 because;it had no tax liability for the 2013 tax year and has been in business for at;least 12 months.;True False;42. Most;corporations use the annualized income method to determine their required;annual payment for purposes of making quarterly estimated payments.;True False;43. Large;corporations (corporations with over $1,000,000 in taxable income in any of the;three years prior to the current year) can use their prior tax year liability;to determine all required estimated quarterly payments for the current year.;True False;44. For;estimated tax purposes, a "large" corporation is any corporation with;average annual gross receipts of $5,000,000 in the three years prior to the;current year.;True False;45. Small;corporations (in terms of average annual gross receipts) are exempt from the;alternative minimum tax.;True False;46. Urban;Corporation receives tax-exempt income from Denver municipal bonds. All the;proceeds from the bonds were used to fund public projects. In computing its AMT;base, Urban must add back the interest income from its municipal bonds to;taxable income.;True False;47. Depreciation;adjustments can increase or decrease the AMT base relative to taxable income.;True False;48. The tax;rate for the corporate alternative minimum tax is a flat 26%.;True False;49. The;adjusted current earnings (ACE) adjustment is 75% of the difference between a;corporation's alternative minimum taxable income before the ACE adjustment and;its ACE.;True False;50. Corporations;are allowed to deduct at least some AMT exemption regardless of profitability.;True False;51. A;corporation with an AMTI of $400,000 will have all of its AMT exemption;phased-out.;True False;52. Minimum;tax credits generated by the corporate AMT can be carried forward indefinitely.;True False;53. A;corporation with a minimum tax credit carryover may reduce regular tax down to;the amount of its tentative minimum tax when its regular tax exceeds its;tentative minimum tax.;True False;54. The amount;of a corporation's AMT is the amount of its tentative minimum tax in excess of;its regular tax.;True False;Multiple Choice Questions;55. Which of;the following is not calculated in the corporate income tax formula?;A. Gross;income;B. Adjusted;gross income;C. Taxable;income;D. Regular;tax liability;56. WFO;Corporation has gross receipts according to the following schedule;If WFO began business as a cash-method corporation in Year;1, in which year would it have first been required to use the accrual method?;A. Year 3;B. Year 4;C. Year 5;D. Year 6;E. None of;these.;57. Which of;the following does NOT create a permanent book-tax difference?;A. Organizational;and start-up expenses;B. Key;employee death benefit income;C. Fines and;penalties expenses;D. Municipal;bond interest income;58. Which of;the following does NOT create a temporary book-tax difference?;A. Deferred;compensation;B. Bad-debt;expense;C. Depreciation;expense;D. Domestic;production activities deduction;59. Which of;the following statements regarding book-tax differences is true?;A. Corporations;are not required to report book-tax differences on their income tax returns.;B. Corporations;will eventually recognize the same amount of income for book and tax purposes;for income-related temporary book-tax differences.;C. Income;excludable for tax purposes usually creates a temporary book-tax difference.;D. None of;these is true.;60. It is;important to distinguish between temporary and permanent book-tax differences;for which of the following reasons?;A. Temporary;book-tax differences will reverse in future years whereas permanent differences;will not.;B. Certain;corporations are required to disclose book-tax differences as permanent or;temporary on their tax returns.;C. Temporary;book-tax differences will reverse in future years whereas permanent differences;will not, and certain corporations are required to disclose book-tax;differences as permanent or temporary on their tax returns.;D. Neither;temporary nor permanent book-tax differences will reverse in future years nor;are certain corporations required to disclose book-tax differences as permanent;or temporary on their tax returns.;61. TrendSetter;Inc. paid $50,000 in premiums for life insurance coverage for its key;employees. What is the nature of the book-tax difference created by this;expense?;A. Permanent;favorable;B. Permanent;unfavorable;C. Temporary;favorable;D. Temporary;unfavorable;62. iScope;Inc. paid $3,000 in interest on a loan it used to purchase municipal bonds.;What is the nature of the book-tax difference relating to this expense?;A. Permanent;favorable;B. Permanent;unfavorable;C. Temporary;favorable;D. Temporary;unfavorable;63. AmStore;Inc. sold some of its heavy machinery at a gain. AmStore used the straight-line;method for financial accounting depreciation and MACRS for tax cost-recovery.;If accumulated depreciation for financial accounting purposes is less than;accumulated depreciation for tax reporting purposes, what is the nature of the;book-tax difference associated with the gain on the sale?;A. Permanent;favorable;B. Permanent;unfavorable;C. Temporary;favorable;D. Temporary;unfavorable;64. Corporation;A receives a dividend from Corporation B. Corporation A includes the dividend;in its gross income for tax and financial accounting purposes (no book-tax;difference). If A has accounted for the dividend correctly (following the;general rule), how much of B stock does A own?;A. A owns;less than 20 percent of the stock of B;B. A owns at;least 20 but not more than 50 percent of the stock of B;C. A owns;more than 50 percent of the stock of B;D. Cannot be;determined;65. Corporation;A receives a dividend from Corporation B. It includes the dividend in gross;income for tax purposes but includes a pro-rata portion of B's earnings in its;financial accounting income. If A has accounted for the dividend correctly;(using the general rule), how much of B's stock does A own?;A. A owns;less than 20 percent of the stock of B;B. A owns at;least 20 but not more than 50 percent of the stock of B;C. A owns;more than 50 percent of the stock of B;D. Cannot be;determined;66. Coop Inc.;owns 40% of Chicken Inc., both Coop and Chicken are corporations. Chicken pays;Coop a dividend of $10,000 in 2014. Chicken also reports financial accounting;earnings of $20,000 for that year. Assume that Coop follows the general rule of;accounting for investment in Chicken. What is the amount and nature of the;book-tax difference to Coop associated with the dividend distribution (ignoring;the dividends received deduction)?;A. $2,000;unfavorable;B. $2,000;favorable;C. $10,000;unfavorable;D. $10,000;favorable;E. None of;these;67. Over what;time period do corporations amortize purchased goodwill for tax purposes?;A. 180;months;B. 150;months;C. 60 months;D. None of;these;68. Which of;the following statements regarding book-tax differences associated with;purchased goodwill is false?;A. It is;possible to have no book-tax difference in a year when there is no goodwill;amortization for tax purposes.;B. In a year;when goodwill is impaired and yet fully amortized for tax purposes (so no tax;amortization of the goodwill for that year), the book-tax difference will be;unfavorable.;C. Temporary;book-tax differences associated with goodwill are always favorable.;D. If goodwill;has been fully amortized for tax purposes in a previous year, the book-tax;difference is equal to the amount of impairment recognized.;69. Which of;the following describes the correct treatment of incentive stock options (ISOs);granted when ASC 718 (a codification of FAS 123R) applies?;A. Financial;accounting?no expense, tax?no deduction;B. Financial;accounting?no expense, tax?deduct bargain element at exercise;C. Financial?expense;value over vesting period, tax?no deduction;D. Financial?expense;value over vesting period, tax?deduct bargain element at exercise;70. Which of;the following describes the correct treatment of incentive stock options (ISOs);granted when ASC 718 (a codification of FAS 123R) does not apply?;A. Financial;accounting?no expense, tax?no deduction;B. Financial;accounting?no expense, tax?deduct bargain element at exercise;C. Financial;accounting?expense value over vesting period, tax?no deduction;D. Financial;accounting?expense value over vesting period, tax?deduct bargain element at;exercise;71. Which of;the following describes the correct treatment of the exercise of nonqualified;stock options (NQOs) that were granted when ASC 718 (a codification of FAS;123R) applies?;A. Financial?no;expense, tax?no deduction;B. Financial?no;expense, tax?deduct bargain element at exercise;C. Financial?expense;value over vesting period, tax?no deduction;D. Financial?expense;value over vesting period, tax?deduct bargain element at exercise;72. Which of;the following describes the correct treatment of nonqualified stock options;(NQOs) granted when ASC 718 (a codification of FAS 123R) did not apply?;A. Financial?no;expense, tax?no deduction;B. Financial?no;expense, tax?deduct bargain element at exercise;C. Financial?expense;value over vesting period, tax?no deduction;D. Financial?expense;value over vesting period, tax?deduct bargain element at exercise;73. Which of;the following statements regarding nonqualified stock options (NQOs) is false?;A. If ASC;718 (a codification of FAS 123R) applies, book-tax differences associated with;NQOs may be either permanent or temporary.;B. In a;given year when ASC 718 applies, if the value of the options that vest is;greater than the bargain element of options exercised, the book-tax difference;for that year is unfavorable.;C. Before;ASC 718 applied, no expense recognition was required for NQOs for financial;accounting purposes.;D. If ASC 718;does not apply, all stock option-related book-tax differences are temporary.;74. Which of;the following statements regarding incentive stock options (ISOs) is false?;A. If ASC;718 (a codification of FAS 123R) does not apply, ISOs do not create book-tax;differences.;B. For ISOs;granted when ASC 718 applies, book-tax differences are always unfavorable.;C. If ASC;718 applies, the value expensed for book purposes in a given year is the value;of the options that vest.;D. If ASC;718 applies, book-tax differences associated with ISOs may be either permanent;or temporary.;75. Orange;Inc. issued 20,000 nonqualified stock options valued at $40,000 (in total). The;options vest over two years - half in 2014 (the year of issue) and half in;2015. One thousand options are exercised in 2015 with a bargain element on each;option of $6. What is the 2015 book-tax difference associated with the stock;options?;A. $14,000;unfavorable;B. $14,000;favorable;C. $20,000;unfavorable;D. $20,000;favorable;E. None of;these;76. In January;2013, Khors Company issues nonqualified stock options to its CEO, Jenny Svaro.;Because the company does not expect Ms. Svaro to leave the company, the options;vest at the time they are granted with a total value of $50,000. In December of;2014, the company experiences a surge in its stock price, and Ms. Svaro;exercises the options. The total bargain element at the time of exercise is;$60,000. For 2014, what is the book-tax difference due to the options;exercised?;A. 10,000;unfavorable;B. 10,000;favorable;C. 50,000;unfavorable;D. 60,000;favorable;77. In January;2014, Khors Company issues nonqualified stock options to its CEO, Jenny Svaro.;Because the company does not expect Ms. Svaro to leave the company, the options;vest at the time they are granted with a total value of $50,000. In December of;2015, the company experiences a surge in its stock price, and Ms. Svaro;exercises the options. The total bargain element at the time of exercise is;$40,000. For 2015, what is the nature of the book-tax difference due to the;options exercised?;A. Favorable;and temporary;B. Favorable;and permanent;C. Unfavorable;and temporary;D. Unfavorable;and permanent;E. Not;enough information to determine.;78. Which of;the following statements regarding capital gains and losses is false?;A. In terms;of tax treatment, corporations generally prefer capital gains to ordinary;income.;B. Like;individuals, corporations can deduct $3,000 of net capital losses against;ordinary income in a given year.;C. C;corporations can carry back net capital losses three years and they can carry;them forward for five years.;D. Corporations;must apply capital loss carrybacks and carryovers in a particular order.;79. For;corporations, which of the following regarding net capital losses is true?;A. A corporation;that experiences a net capital loss has a favorable book-tax difference in the;year of the loss.;B. A;corporation that experiences a net capital loss in year 4 first carries the;loss back to year 3, then year 2, and then year 1 before carrying it forward.;C. Net;capital loss carrybacks are deductible in determining a corporation's net;operating loss.;D. Net;capital loss carrybacks and carryovers create temporary book-tax differences if;they are used before they expire.;80. Studios;reported a net capital loss of $30,000 in year 5. It reported net capital gains;of $14,000 in year 4 and $27,000 in year 6. What is the amount and nature of;the book-tax difference in year 6 related to the net capital carryover?;A. $11,000;unfavorable;B. $11,000;favorable;C. $16,000;unfavorable;D. $16,000;favorable;81. Tatoo Inc.;reported a net capital loss of $13,000 in 2014. It had a net capital gain of;$4,300 in 2012 and $3,000 in 2011. In 2013, although the company suffered a net;operating loss, it had net capital gains of $1,000. What is the amount of the;Tatoo's capital loss carryover remaining after it applies the carryback?;A. $4,700;B. $5,700;C. $8,700;D. $13,000;82. BTW;Corporation has taxable income in the current year that can be offset with an;NOL from a previous year. What is the nature of the book-tax difference created;by the net operating loss carryover deduction in the current year?;A. Permanent;favorable;B. Permanent;unfavorable;C. Temporary;favorable;D. Temporary;unfavorable;83. Which of;the following is allowable as a deduction in calculating a corporation's net;operating loss?;A. Charitable;contribution deduction;B. Domestic;production activities deduction;C. Net;capital loss carryback;D. Net;operating losses from other years;84. Which of;the following statements regarding net operating losses generated in 2013 is;true?;A. Corporations;can carry net operating losses back two years and forward up to 15 years.;B. A;corporation may elect to forgo carrying a net operating loss back and instead;carry it over to future years.;C. When a;corporation applies a net operating loss carryover, it reports a favorable;permanent book-tax difference in the amount of the applied carryover.;D. Marginal;tax rates are irrelevant in determining the tax benefit of applying a net;operating loss carryback or carryover.;E. None of;these is a true statement.;85. Which of;the following statements regarding charitable contributions is false?;A. Only;contributions made to qualified charitable organizations are deductible.;B. Charitable;contribution deductions are subject to a limitation based on the corporation's;taxable income (before certain deductions).;C. Corporations;can qualify to deduct a contribution before actually paying the contribution to;the charity.;D. The;amount deductible for non-cash contributions is always the adjusted basis of;the property donated.;86. Which of;the following is unnecessary to allow an accrual-method corporation to deduct;charitable contributions before actually paying the contribution to charity?;A. Approval;of the payment from the board of directors.;B. Approval;from the IRS prior to making the contribution.;C. Payment;made within two and one-half months of the tax year end.;D. All of;these are necessary.;87. Canny;Foods Co. is considering three ways it could contribute to a local, qualified;charity. First, it could give $5,000 in cash. Second, it could give stock it;initially purchased two years ago for $4,000 but is now worth $6,000. Third, it;could give items of inventory with a fair market value of $7,000 but with an;adjusted basis of $3,000. Which of the following correctly describes the;relation among possible charitable contributions in terms of amount deductible;for tax purposes?;A. Cash >;Stock > Inventory;B. Stock;Cash > Inventory;C. Inventory;Stock > Cash;D. Inventory;Cash > Stock;88. Which of;the following is deductible in calculating the charitable contribution limit;modified taxable income?;A. Net;capital loss carrybacks;B. NOL;carrybacks;C. NOL;carryovers;D. Charitable;contributions;89. Remsco has;taxable income of $60,000 and a charitable contribution limit modified taxable;income of $72,000. Its charitable contributions for the year were $7,500. What;is Remsco's current-year charitable contribution deduction and contribution;carryover?;A. $6,000;current-year deduction, $1,500 carryover;B. $7,500;current-year deduction, $0 carryover;C. $1,200;current-year deduction, $6,300 carryover;D. $7,200;current-year deduction, $300 carryover;90. If a;corporation's cash charitable contributions exceed the charitable contribution;deduction limit, what kind of book-tax difference is created?;A. Permanent;favorable;B. Permanent;unfavorable;C. Temporary;favorable;D. Temporary;unfavorable;91. Which of;the following statements regarding excess charitable contributions;(contributions in excess of the modified taxable income limitation) by;corporations is true?;A. Corporations;may not carry over or carry back excess charitable contributions.;B. Corporations;can carry excess charitable contributions over to a future year or back to a;prior year.;C. Corporations;can carry excess charitable contributions over to a future year but not back to;a prior year.;D. Corporations;can carry excess charitable contributions back to a prior year but not over to;a future year.;92. Which of;the following statements regarding the dividends and/or the dividends received;deduction (DRD) is true?;A. Dividends;are taxed at preferential rates for corporations as well as for individuals.;B. The DRD;can increase the net operating loss of a corporation.;C. Corporations;are allowed to deduct from a dividend received the product of the dividend and;the percentage of the receiving corporation's ownership in the distributing;corporation's stock.;D. The DRD;allows corporations to deduct the amount of dividends that they distribute.;93. Which of;the following is deductible in calculating DRD modified taxable income?;A. Charitable;contribution deduction;B. NOL;carrybacks;C. NOL;carryovers;D. Dividends;received deduction;94. Jazz;Corporation owns 50% of the Williams Corp. stock. Williams distributed a;$10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income before the;dividend was $100,000. What is the amount of Jazz's dividends received;deduction on the dividend it received from Williams Corp.?;A. $0;B. $7,000;C. $8,000;D. $10,000;95. Jazz;Corporation owns 10% of the Williams Corp. stock. Williams distributed a;$10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before;the dividend was ($2,000). What is the amount of Jazz's dividends received;deduction on the dividend it received from Williams Corp.?;A. $0;B. $5,600;C. $7,000;D. $8,000;E. None of;these.;96. Jazz;Corporation owns 10% of the Williams Corp. stock. Williams distributed a;$10,000 dividend to Jazz Corporation. Jazz Corp.'s taxable income (loss) before;the dividend was ($6,000). What is the amount of Jazz's dividends received;deduction on the dividend it received from Williams Corp.?;A. $0;B. $2,800;C. $4,200;D. $7,000;E. None of;these.;97. Which of;the following is not a type of controlled group as defined in the Internal;Revenue Code?;A. Parent-subsidiary;B. Brother-sister;C. Combined;D. All of;these are types of controlled groups.;98. TireShop;Inc. owns 85% of Rubber Supply Co.'s voting stock throughout the tax year.;TireShop and Rubber Supply would be considered as what kind of controlled;group?;A. Parent-subsidiary;B. Brother-sister;C. Combined;D. None of;these;99. Together;Kurt and Esmeralda own 60% of three corporations: RAZ, DVA, and TRE. The three;corporations would be considered as what kind of controlled group for tax;purposes?;A. Parent-subsidiary;B. Brother-sister;C. Combined;D. The three;corporations would not be considered to be a controlled group for tax purposes.;100. Which of;the following statements regarding controlled groups is false?;A. The;purpose of the controlled group rules is to essentially treat the group as;though it were one entity for purposes of determining certain tax benefits.;B. Having;several entities treated as a controlled group is advantageous for tax purposes;because each corporation in the group is allowed to use the 15% tax bracket in;the corporate tax rate schedule in computing its regular income tax liability.;C. Lauren;owns 100% of Corporation A stock and 100% of Corporation B stock. Corporation A;and Corporation B form a controlled group.;D. Corporation;A owns 100% of Corporation B. Corporation A and Corporation B form a controlled;group.;101. Which of the;following regarding Schedule M-1 and Schedule M-3 of Form 1120 is false?;A. In;general, smaller corporations are required to complete Schedule M-1 while;larger corporations are required to complete Schedule M-3.;B. Schedule;M-3 lists more book-tax differences than Schedule M-1.;C. Both;Schedules M-1 and M-3 reconcile to a corporation's bottom line taxable income.;D. Schedule;M-1 does not distinguish between temporary and permanent book-tax differences;whereas Schedule M-3 does.;102. Which of;the following statements is false regarding consolidated tax returns?;A. An;affiliated group can file a consolidated tax return only if it elects to do so.;B. To file a;consolidated tax return, one corporation must own at least 50% of the stock of;another corporation.;C. For a;group of corporations filing a consolidated tax return, an advantage is that;losses of one group member may offset gains of another group member.;D. For a;group of corporations filing a consolidated tax return, losses from certain;intercompany transactions are deferred until realized through a transaction;outside of the group.;103. What is the;unextended due date of the tax return of a calendar-year corporation?;A. February;15.;B. March 15.;C. April 15.;D. September;15.;104. Which of;the following is not an acceptable method of determining the required annual;payment of federal income tax for corporations?;A. 100;percent of the prior year's tax liability (with a few exceptions);B. 100;percent of the current year's tax liability;C. 100;percent of the estimated current year tax liability using the annualized income;method;D. All of;these are acceptable methods of determining the required annual payment of;federal income tax for corporations;105. Which of;the following statements is false regarding corporate estimated tax payments?;A. The due;dates for estimated tax payments are the 15th day of the 4th, 6th, 9th, and;12th months of the corporation's tax year.;B. Corporations;must pay estimated taxes only if they have a federal income tax liability;greater than $10,000 (including the alternative minimum tax).;C. Even;though a corporation extends its tax return it still must pay its tax liability;for the year by two and one half months after year end.;D. Corporations;using the annualized income method for determining estimated tax payments;project their tax liability for the year based on income from the first;second, and third quarters.;106. Omnidata;uses the annualized income method to determine its quarterly federal income tax;payments. It had $100,000, $50,000, and $90,000 of taxable income for the;first, second, and third quarters, respectively ($240,000 in total through the;first three quarters). What is Omnidata's annual estimated taxable income as of;the end of the third quarter?;A. $300,000;B. $320,000;C. $400,000;D. $480,000;107. Rapidpro;Inc. had more than $1,000,000 of taxable income two years prior to the current;year. It would like to use its prior year tax liability (which was very low but;above zero) to determine its quarterly estimated payments this year. Which of;the following statements is true?;A. Rapidpro;may use the prior year tax liability to determine its first and second quarter;estimated tax payments only since it is a large corporation.;B. To avoid;penalty, the second quarter estimated payment must be large enough to cover 50;percent of its estimated annual tax liability annualized from its first quarter;estimated taxable income (assume it does not rely on its current year actual;tax liability to determine its estimated tax payment).;C. To avoid;penalty, the third quarter estimated payment must be large enough to cover 50;percent of its estimated annual tax liability annualized from its third quarter;estimated taxable income (assume it does not rely on its current year actual;tax liability to determine its estimated tax payment).;D. None of;these is true.;108. Which of;the following statements regarding the alternative minimum tax is false?;A. Corporations;compute the AMT by multiplying their AMT base by 35% and subtracting their;regular tax liability.;B. Small;corporations are exempt from the AMT.;C. All;first-year corporations are exempt from the AMT.;D. None of;these is false (choose if you believe All of these are true).;109. Which of;the following is not an AMT adjustment?;A. Adjustment;for depreciation;B. Adjustment;of gain or loss on sale of depreciable assets;C. Adjustment;for adjusted current earnings (ACE);D. Adjustment;for domestic production activities deduction;110. In the;current year, FurnitureKing Corporation recognized $32,000 of income from an;installment sale it made in a previous tax year. If installment sales are the;only difference between ACE and alternative minimum taxable income (before the;ACE adjustment), what is the amount and nature of the ACE adjustment for the;current tax year?;A. $24,000;favorable;B. $24,000;unfavorable;C. $32,000;favorable;D. $32,000;unfavorable;111. XPO;Corporation has a min

 

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