AC507 Unit 2 Quiz

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AC507 Unit 2 Quiz

AC507 Unit 2 Quiz

  1. Coral Corporation (a C corporation) sold $100,000 of merchandise for which it paid $40,000. It also paid $35,000 of other expenses. All transactions were in cash. What is Coral Corporation’s after-tax net cash inflow?
  2. Peanut Co. has 2 projects in which it can invest. Project X has a $300,000 initial cost and will return $600,000 before tax in year 2. Project Y has $600,000 initial cost and will return $1,000,000 before tax in year 4. The company uses an 8 percent discount rate for project evaluation and its marginal tax rate is expected to be 34 percent in all years. Which project(s) should Peanut Co. invest in?
  3. Which of the following committees is not involved in the tax writing process?
  4. The Internal Revenue Code is divided into
  5. Clayton Corporation receives $100,000 to provide garbage service for the next four years
  6. Which of the following statements explains timing differences for tax and financial accounting?
    i. Income is recognized in one period for tax and in another period for financial accounting.
    ii. Income is recognized for accounting but not for tax purposes.
    iii. Expenses not deductible for tax purposes are deductible for financial accounting.
    iv. An expense is deducted currently for tax but in a later period for financial accounting.
  7. Which of the following statements explain permanent differences between tax and financial accounting?
             i. Income is recognized in one period for tax and in another period for financial accounting
             ii. Income is recognized for accounting but not for tax purposes.
     iii. Expenses not deductible for tax purposes are deductible for financial accounting.
     iv. An expense is deducted currently for tax but in a later period for financial accounting.
  8. Wilma purchased an annuity policy for $100,000 that will pay her $10,000 per year for life beginning on her 60th birthday in 5 years. At 60, her life expectancy is 25 years. How much of each annual payment can Wilma exclude from income?
  9. n 1989, when Sherry was 55 years old with an additional life expectancy of 20 years, she purchased a single life annuity for $200,000 that was to pay her $15,000 per year for life starting in 1993. Sherry just received her $15,000 payment for 2014. How much of the $15,000 must Sherry include in income?
  10. To whom do the doctrines of constructive receipt and claim of right apply?
  11. Cal (an accrual-basis taxpayer) enters into a ten-year lease on some rental property. In year 1, Cal receives $3,000 as a security deposit, $5,000 for the first year’s rent, and $5,000 for the last year’s rent. How much income must Cal report in this first year?
  12. A decision in the small case division of the Tax Court can be appealed only to