Deck 3: The Corporate Income Tax

Question 1

Identify which of the following statements is false.

A)A corporation's fiscal year generally must end on the last day of the month.
B)A fiscal year may not end on December 31.
C)A new corporation can elect a fiscal year that runs from February 16 to February 15 of the following year.
D)A corporation's first tax year may not cover a full 12-month period.

Answer 1

C

Question 2

A C corporation must use a calendar year as its tax year unless it has a substantial business purpose to use a fiscal year.

Answer 2

False

Question 3

Dallas Corporation,not a dealer in securities,realizes taxable income of $60,000 from the operation of its business.Additionally,in the same year,Dallas realizes a long-term capital loss of $10,000 from the sale of marketable securities.If the corporation realizes no other capital gains or losses,what is the proper treatment for the $10,000 long-term capital loss on the tax return?

A)Use $3,000 of the loss to reduce taxable income and carry $7,000 of the long-term capital loss forward for five years.
B)Use $6,000 of the loss to reduce taxable income and carry $4,000 of the long-term capital loss forward for five years.
C)Use $10,000 of the long-term capital loss to reduce taxable income.
D)Carry the $10,000 long-term capital loss back three years as a short-term capital loss,then forward five years.

Answer 3

D

Question 4

Trail Corporation has gross profits on sales of $140,000 and deductible expenses of $180,000.In addition,Trail has a net capital gain of $60,000.Trail's taxable income is

A)a $20,000 loss.
B)a $40,000 loss.
C)$60,000.
D)$20,000.

Question 5

Corporations may carry charitable contributions in excess of the income limitation forward for five years.

Question 6

Corporations are permitted to deduct $3,000 in net capital losses annually.

Question 7

Identify which of the following is false.

A)Corporations that sell real property at a gain must report an additional 20% of the entire gain as ordinary income.
B)Corporations selling real property that previously had been depreciated using an accelerated method are subject to Sec.291.
C)Section 291 reduces the amount of net Sec.1231 gains that can be offset by corporate capital losses.
D)Section 291 recapture applies to Sec.1250 property.

Question 8

Identify which of the following statements is true.

A)A corporation that is a member of an affiliated group filing a consolidated tax return may be allowed a tax year which is different from the group's parent.
B)An S corporation must generally use a calendar year.
C)A corporation's first year must cover a twelve-month period.
D)All of the above are false.

Question 9

Identify which of the following statements is false.

A)A corporation with annual gross receipts of $25,000,000 or less can use the accrual method to account for sales,cost of goods sold,inventories,accounts receivable and payable,and the cash method for other income and expenses.
B)Casualty losses incurred by a corporation are deductible subject to a nondeductible floor similar to those applicable to individuals.
C)The passive loss rules do not apply to widely held C corporations.
D)Corporations may receive a deduction for dividends received from other corporations.

Question 10

Sparks Corporation receives a dividend of $100,000 from Jill Corporation,a C corporation.Sparks owns 70% of Jill Corporation stock.Sparks' dividends-received deduction is $65,000.

Question 11

If a controlling shareholder sells depreciable property to a controlled corporation and the property is depreciable by the purchaser,any gain on the sale is a 1231 gain.

Question 12

Identify which of the following statements is true.

A)A corporation is a separate taxpaying entity that must file a tax return annually.
B)A newly formed corporation must select its basic accounting method.
C)The terms "regular corporation" and "C corporation" are synonymous.
D)All of the above are true.

Question 13

All of the taxable income of a personal service corporation is taxed at a flat 21% rate.

Question 14

Identify which of the following statements is true.

A)A corporate capital loss can be carried back three years,and then can be carried forward five years.
B)Corporate capital loss carrybacks can offset corporate ordinary income earned in previous years.
C)At the election of a corporation,a net capital loss carryback can be forgone and carried forward only.
D)All of the above are false.

Question 15

NOLs arising in tax years ending after 2017 carry over to subsequent tax years indefinitely.

Question 16

The dividends-received deduction is designed to reduce double taxation of corporate dividends payable to individual shareholders.

Question 17

Once a corporation has elected a taxable year,it can change the taxable year without IRS permission if

A)the resulting short period has a net operating loss of $100,000 that the corporation wants to carry forward.
B)the corporation changed its taxable year seven years ago.
C)the corporation is not an S corporation.
D)a corporation can change its taxable year without IRS permission in all of the above situations.

Question 18

Organizational expenses incurred after 2019 are amortized over five years.

Question 19

A new corporation may generally select one of the following accounting methods with the exception of

A)cash method.
B)accrual method.
C)retail method.
D)hybrid method.

Question 20

Corporations may deduct the adjusted basis of inventory plus one-half of the excess of the property's FMV over its adjusted basis if the inventory is used for the care of the ill,needy,or infants.

Question 21

Identify which of the following statements is true.

A)Organizational expenditures incurred by a corporation do not include the cost of accounting services necessary to create the corporation.
B)Organizational expenditures incurred by a corporation do not include the cost of printing stock.
C)Unamortized organizational expenses cannot be deducted when the corporation is liquidated.
D)All of the above are false.

Question 22

Blueboy Inc.contributes inventory to a qualified charity for use in feeding the needy.The inventory has a $70,000 FMV and a $30,000 adjusted basis.Blueboy Inc.can take a charitable contribution deduction of

A)$20,000.
B)$30,000.
C)$50,000.
D)$60,000.

Question 23

Super Corporation gives a painting to a museum for public display on August 6.The painting was purchased on April 3 of the same year for $20,000 and is worth $30,000 at the date of gift.Also,Super accrues a charitable contribution on December 30 and pays the $12,000 contribution on February 1 of the next year.Super Corporation is a calendar-year corporation that uses the accrual method of accounting.Before considering the 10% limitation rule,the maximum deduction for the current year is

A)$12,000.
B)$20,000.
C)$30,000.
D)$32,000.

Question 24

Identify which of the following statements is true.

A)The dividends-received deduction is designed to reduce double taxation of corporate dividends.
B)The full 65% dividends-received deduction is available without restriction.
C)If a corporation receives dividends eligible for the 65% dividends-received deduction and the 50% dividends-received deduction,the 50% dividends-received deduction reduces taxable income prior to the 65% deduction.
D)All of the above are false.

Question 25

Maxwell Corporation reports the following results: $\begin{array}{|l|l|}\hline \text { Gross income from operations }&\$90,000\\\hline \text { Dividends received from } 18 \% \text { owned domestic } & \\\text { corporation } & 70,000 \\\hline \text { Expenses } & 100,000 \\\hline\end{array}$ Maxwell's dividends-received deduction is

A)$30,000.
B)$35,000.
C)$56,000.
D)$70,000.

Question 26

In February of the current year,Brent Corporation donates computer equipment that it purchased six months ago to Eastside High School for use in its educational program.The donated property had a $20,000 adjusted basis to Brent and a $40,000 FMV.What is the amount of the gift?

A)$20,000
B)$30,000
C)$35,000
D)$50,000

Question 27

Edison Corporation is organized on July 31.The corporation starts business on August 10.The corporation adopts a November 30 fiscal year end.The following expenses are incurred during the year: $$\begin{array} { | c | l | c | } \hline \text { Date } & { \text { Type } } & \text { Amount } \\\hline & \text { Attorney's fees associated with obtaining charter } & \\6 - 30 & \text { Underwriter fees for stock sale } & \$ 10,000 \\7 - 10 & \text { Transfer cost for property contributed to the corporation for } & 25,000 \\7 - 15 & \text { stock } & 3,000 \\6 - 30 & \text { Costs of organizational meetings } & 2,000 \\12 - 6 & \text { Legal fees to modify charter } & 4,000 \\\hline\end{array}$$ What is the maximum amount of organizational expenditures that can be deducted by the corporation for its first tax year ending November 30?

A)$16,000
B)$12,000
C)$5,156
D)$800

Question 28

If a corporation's charitable contributions exceed the deduction limitation in a particular year,the excess

A)is not deductible in any future year.
B)becomes a carryover to a maximum of five succeeding years.
C)may be carried back to the third preceding year.
D)is carried over indefinitely.

Question 29

Garth Corporation donates inventory having an adjusted basis of $40,000 and an FMV of $150,000 to a qualified public charity.The inventory will be used by the charity to care for the ill.The maximum charitable contribution deduction before consideration of the 10% limitation is

A)$40,000.
B)$55,000.
C)$80,000.
D)$95,000.

Question 30

Identify which of the following statements is true.

A)A corporation that accrues compensation payable to an employee must pay the amount within two and one-half months after the close of the taxable year to deduct the amount in the year of the accrual.
B)Accrued compensation that is deductible in the year of accrual is considered to be part of an IRS deferred compensation plan.
C)Accrued compensation not paid within three and one-half months after the close of the corporation tax year is deducted in the year following the accrual.
D)All of the above are false.

Question 31

Identify which of the following statements is true.

A)When a corporation donates appreciated capital gain property to a charity,the amount of the contribution deduction generally equals the property's FMV.
B)When a corporation donates appreciated capital gain property to a private nonoperating foundation,the corporation's contribution is limited to the property's FMV minus the ordinary gain that would have resulted from the property's sale.
C)When a corporation contributes appreciated property to a charity,the charitable contribution deduction is the property's FMV or adjusted basis,depending on the election made by the taxpayer.
D)All of the above are false.

Question 32

Booth Corporation sells a building classified as a residential rental property for $200,000.The MACRS straight-line depreciation taken is $20,000 and the adjusted basis of the building is $170,000.Booth Corporation must recognize ordinary income of

A)$30,000.
B)$20,000.
C)$4,000.
D)$0.

Question 33

Identify which of the following statements is false.

A)The 50% dividends-received deduction is limited to 50% of the taxable income of the corporation without regard to any NOL deduction,any capital loss carryback,and the dividends-received deduction itself unless the dividends-received deduction produces an NOL.
B)Members of an affiliated group can claim a 90% dividends-received deduction for dividends received from other group members that is not subject to a taxable income limitation.
C)A corporate dividends-received deduction is not allowed for dividends received on stock held for 40 days.
D)All of the above are false.

Question 34

Identify which of the following statements is true.

A)"Ordinary income property" with regard to the charitable contribution deduction does not include property whose sale would have produced a short-term capital gain.
B)The Twilight Corporation purchases inventory for $5,000.Its FMV on the date it is donated to the Blue-Gray Hospital for the care of the needy is $13,000.The maximum charitable contribution deduction available for the donation is $9,000.
C)Corporations' charitable deductions are limited to 20% of their adjusted taxable income.
D)All of the above are false.

Question 35

Organizational expenditures include all of the following except for

A)costs incurred when issuing stock.
B)legal costs incident to the creation of the corporation.
C)expenses of organizational meetings.
D)fees paid to the state of incorporation.

Question 36

Evans Corporation has a $15,000 net capital loss in 2017.The corporation reported the following capital gain netting in income during the past three years.Identify which of the following statements is true.
$$\begin{array} { | c | r | } \hline \text { Year } & \begin{array} { c } \text { Capital Gain } \\\text { Net Income }\end{array} \\\hline 2014 & \$ 10,000 \\2015 & 11,000 \\2016 & 5,000 \\\hline\end{array}$$

A)The loss is used to offset the gains from 2016 and then carried back to offset $10,000 of the gains in 2014.
B)The loss is used to offset the $11,000 of the 2015 gains and then carried back to offset $4,000 of the year 2014 net gain.
C)The loss is used to offset $3,000 of 2014,2015 and 2016 capital gains,remaining amount carried forward at $3,000 a year until expired.
D)The loss is used to offset the year 2014 net gains,then $5,000 of the year 2015 net gains.

Question 37

Green Corporation is incorporated on March 1 and begins business on June 1.Green's first tax year ends on October 31,i.e.,a short year.Green incurs the following expenses during the year: $$\begin{array} { | l | l | r | } \hline { \text { Month } } & { \text { Type } } & \text { Amount } \\\hline \text { February } & \text { Draft charter } & \$ 2,000 \\\cline { 2 - 3 } \text { March } & \text { Stock commission } & 30,000 \\\text { March } & \text { Accounting feesto set up books } & 2,000 \\\cline { 2 - 3 } \text { April } & \text { Temporary director fees } & 2,000 \\\text { December } & \text { Charter modification fee } & 1,000 \\\hline\end{array}$$ What is the deduction for organizational expenses if Green chooses to deduct its costs as soon as possible?

A)$36,000
B)$5,028
C)$667
D)$500

Question 38

Money Corporation has the following income and expenses for the tax year: $\begin{array}{|l|l|}\hline \text { Gross profit on sales: }&\$200,000\\\hline \text { Expenses: } & 700,000 \\\hline \text { Dividends received from less-than-20\%-owned domestic } & \\\text { corporations: } & 20,000\\\hline\end{array}$ What is Money's net operating loss?

A)$490,000
B)$494,000
C)$520,000
D)$220,000

Question 39

Island Corporation has the following income and expense items for the year: $\begin{array}{|l|l|}\hline \text { Gross receipts from sales }&\$60,000\\\hline \text { Dividends received from } 15 \% \text { owned domestic } & \\\text { corporation } & 40,000 \\\hline \text { Expenses connected with sales } & 30,000\\\hline \end{array}$ The taxable income of Island Corporation is

A)$100,000.
B)$70,000.
C)$47,000.
D)$50,000.

Question 40

Richards Corporation has taxable income of $280,000 calculated before the charitable contribution deduction and before its dividends-received deduction of $34,000.Richards makes cash contributions of $35,000 to charitable organizations.What is Richards Corporation's charitable contribution deduction for the current year?

A)$24,600
B)$28,000
C)$31,400
D)$35,000

Question 41

Access Corporation,a large manufacturer,has a taxable income of $16,000,000.Access Corporation's tax is

A)$5,440,000.
B)$3,360,000.
C)$5,600,000.
D)$3,680,000.

Question 42

Joker Corporation owns 80% of Klue Corporation.Joker Corporation also owns 45% of Lion Corporation and 45% of Mark Corporation.Klue Corporation owns 40% of Lion Corporation and 10% of Mark Corporation.Which corporations are members of a controlled group?

A)Klue,Lion,and Mark Corporations
B)Joker,Klue,Lion,and Mark Corporations
C)Joker,Klue,and Lion Corporations
D)Joker and Klue Corporations

Question 43

Delux Corporation,a retail sales corporation,has a taxable income of $500,000.Delux Corporation's regular tax liability is

A)$158,250.
B)$162,200.
C)$105,000.
D)$175,000.

Question 44

Baxter Corporation is a personal service corporation.Baxter Corporation has taxable income of $10,000.Baxter Corporation's tax is

A)$1,500.
B)$2,400.
C)$2,100.
D)$2,900.

Question 45

Identify which of the following statements is true.

A)A corporate tax return must be filed by the fifteenth day of the fourth month following the close of the corporation's tax year.
B)A corporation is required to file a tax return even if it has no taxable income.
C)A corporation with gross receipts,total income,and total assets of $1,000,000 or less is permitted to file Form 1120-A.
D)All of the above are false.

Question 46

Grant Corporation is not a large corporation for estimated tax purposes and reports on a calendar-year basis.Grant expects the following results: $$\begin{array} { | l | r | } \hline \text { Regular tax } & \$ 248,000 \\\hline \text { Alternative minimum tax } & \underline { 40,000 } \\\hline \text { Total tax due } & \$ 288,000 \\\hline\end{array}$$ Grant's tax liability for last year was $240,000.Grant's minimum total estimated tax payment for this year to avoid a penalty is

A)$240,000.
B)$248,000.
C)$288,000.
D)$280,000.

Question 47

Identify which of the following statements is true.

A)For expenses incurred after December 31,2017,no deduction is allowed for any activities involving entertainment,amusement,or recreation,including expenses related to a facility used in connection with these activities.
B)The Dividends Received Deduction for individuals is limited to 50%.
C)Domestic Production Activities Deduction carry overs that originated from pre 2018 tax years are limited to 50% of taxable income until 2025.
D)Deductibility of business interest in a given year is limited to 80% of adjusted taxable income.

Question 48

Two days before the ex-dividend date,Drexel Corporation buys 100 shares of Zebra Corporation stock (less than 1%)for $200,000.Drexel Corporation receives $10,000 of dividends from Zebra Corporation.Two weeks after the ex-dividend date,Drexel Corporation sells the Zebra Corporation stock for $190,000.Which of the following statements is correct?

A)Drexel Corporation cannot recognize a capital loss.
B)Drexel Corporation cannot take a dividends-received deduction on the Zebra Corporation dividend.
C)Drexel Corporation will be allowed a 50% dividends-received deduction when reporting the Zebra Corporation dividend.
D)Drexel Corporation will receive no dividends-received deduction because the stock was purchased ex-dividend.

Question 49

West Corporation purchases 50 shares (less than 1%)of Perch Corporation common stock on April 3.The ex-dividend date is April 4.West Corporation pays $50,000 for the stock and receives a dividend of $5,000 on the Perch stock.On May 1,West Corporation sells the Perch stock for $45,000.West's taxable income before the dividends-received deduction is $4,000.West's dividends-received deduction is

A)$3,500.
B)$3,200.
C)$2,800.
D)$0.

Question 50

Identify which of the following statements is true.

A)A corporate NOL can be carried back two years and forward 15 years.
B)An NOL incurred before 2018 carries forward 20 years and is not subject to the 80% of taxable income limitation.
C)In computing an NOL for the current year,a deduction is allowed for NOLs from previous years.
D)All of the above are false.

Question 51

Andy owns 20% of North Corporation and 60% of Tent Corporation.North and Tent have only one class of stock outstanding.Barbara owns 50% of North Corporation and 20% of Tent Corporation.North and Tent Corporations will be brother-sister corporations if

A)no stock ownership change occurs.
B)Barbara acquires an additional 10% of North stock.
C)Andy acquires an additional 10% of North stock and Barbara acquires an additional 10% of Tent stock.
D)Barbara acquires an additional 10% of North stock and an additional 10% of Tent stock.

Question 52

Walter,who owns all of the Ajax Corporation stock,purchases a truck from Ajax Corporation in January.The truck cost $12,000 and has a $10,000 adjusted basis.Walter pays the truck's $8,000 FMV.Later in the same year,Walter sells the truck to an unrelated party for $13,000.With respect to these transactions

A)Ajax Corporation reports a loss of $2,000 and Walter reports a gain of $5,000.
B)Ajax Corporation reports no loss and Walter reports a gain of $3,000.
C)Ajax Corporation reports a loss of $4,000 and Walter reports a gain of $5,000.
D)Ajax Corporation reports no loss and Walter reports a gain of $5,000.

Question 53

Miller Corporation has gross income of $100,000,which includes $60,000 of dividends from a 10%-owned corporation.In addition,Miller has $80,000 of expenses.Miller's taxable income or loss is

A)$20,000.
B)$6,000.
C)$0.
D)($10,000).

Question 54

Corporate estimated tax payments are due April 15,June 15,September 15,and January 15.

Question 55

Identify which of the following statements is false.

A)Brown Corporation owns 60% of Clark Corporation and 65% of Davis Corporation.Davis Corporation owns 10% of Clark Corporation,and Clark Corporation owns 10% of Davis Corporation.The remaining stock is owned by an individual shareholder.Brown,Davis,and Clark Corporations are a parent-subsidiary controlled group.
B)There are three categories of control groups: parent-subsidiary,brother-sister,and combined.
C)The controlled group test is applied on December 31.
D)A controlled group must apportion certain tax benefits among its members.

Question 56

Identify which of the following statements is true.

A)Any amount of net business interest disallowed due to limitation may be carried over indefinitely.
B)If a corporation accrues an obligation to pay compensation,the corporation must make the payment by year-end to be able to deduct during the current year.
C)Corporations can deduct up to $10,000 in capital losses per year.
D)Net business interest is limited to 50% of adjusted taxable income.

Question 57

Sun and Moon Corporations each have only one class of stock outstanding.Their stock ownership is shown below. $$\begin{array} { | c | c | c | } \hline \text { Shareholder } & \text { Sun Corporation } & \text { Moon Corporation } \\\hline \text { Arthur } & 50 \% & 60 \% \\\text { Brenda } & 20 \% & 40 \% \\\text { Charles } & 30 \% & 0 \% \\\text { David } & 0 \% & 0 \% \\\hline\end{array}$$ Which of the four stock ownership changes that are illustrated is the minimum change that is needed if Sun and Moon Corporations are to be brother-sister corporations under the 50%-80% requirements? (Assume the two corporations are equally valued.)

A)No stock ownership change is required.
B)Charles must acquire an additional 10% of Moon Corporation.
C)Charles must acquire an additional 5% of Sun Corporation.
D)Arthur must acquire an additional 30% of Moon Corporation.

Question 58

Sun and Moon Corporations each have only one class of stock outstanding.Their stock ownership is shown below. $$\begin{array} { | c | c | c | } \hline \text { Shareholder } & \text { Sun Corporation } & \text { Moon Corporation } \\\hline \text { Arthur } & 50 \% & 60 \% \\\text { Brenda } & 20 \% & 40 \% \\\text { Charles } & 30 \% & 0 \% \\\text { David } & 0 \% & 0 \% \\\hline\end{array}$$ Which of the four stock ownership changes that are illustrated is the minimum change that is needed if Sun and Moon Corporations are to be brother-sister corporations under the 50% requirements? (Assume the two corporations are equally valued.)

A)No stock ownership change is required.
B)Arthur sells 4/5ths of his shares in Sun to David.
C)Arthur sells his 2/3rds of his shares to David.
D)Arthur must acquire an additional 30% of Moon Corporation.

Question 59

Identify which of the following statements is true.

A)The charitable contribution deduction is computed after the deduction for an NOL.
B)The charitable contribution deduction is computed after the dividends-received deduction.
C)The NOL deduction claimed by a corporation must be taken after the dividends-received deduction.
D)All of the above are false.

Question 60

Webster,who owns all the Bear Corporation stock,purchases a dump truck from Bear Corporation in January.The truck cost $12,000 and has a $10,000 adjusted basis at the time of the sale.Webster pays Bear the truck's $8,000 FMV.Later in the same year,Webster sells the dump truck to an unrelated party for $6,000.Webster can recognize a loss of

A)$4,000.
B)$2,000.
C)$3,000.
D)$5,000.

Question 61

Which of the following results in a deferred tax asset?

A)Revenue or gains are recognized earlier for book purposes than for tax purposes.
B)Operating loss or tax credit carryforwards exist.
C)Tax basis of an asset is less than its book.
D)Expenses are deductible earlier for tax purposes than for book purposes.

Question 62

Bishop Corporation reports taxable income of $700,000 on its tax return.Given the following information from the corporation's records,determine Bishop's net income per its financial accounting records. $$\begin{array} {| l | r | } \hline \text { Deduction for federal income taxes per books } & \$ 240,000 \\\hline \text { Depreciation claimed on the tax return } & 135,00 \\\hline \text { Depreciation reported on the financial accounting books } & 75,000 \\\hline \text { Life insurance proceeds on death of a corporate officer } & 100,000 \\\hline\end{array}$$

A)$520,000
B)$620,000
C)$660,000
D)$560,000

Question 63

Which of the following types of evidence indicate that a valuation allowance is needed to reduce the deferred tax asset?

A)history of profits
B)excess of appreciated asset values over basis
C)existing contracts or sales backlogs,which will generate significant future income
D)short carryback or carryover periods

Question 64

Identify which of the following statements is true.

A)Form 1120 Schedule L contains the corporation's income statement.
B)Schedule M-1 (Form 1120)is an analysis of the corporation's retained earnings.
C)Organizational expense amortized over fifteen years for purposes of determining taxable income results in an upper adjustment in the initial years to book income on the Schedule M-1 when the expense is being amortized over ten years for book income purposes.
D)All of the above are false.

Question 65

Which of the following items will not create a deferred tax liability?

A)Revenues or gains are recognized earlier for book purposes than for tax purposes.
B)Expenses or losses are deductible earlier for tax purposes than for book purposes.
C)Tax basis of an asset is less than its book basis.
D)Operating loss or tax credit carryforwards exist.

Question 66

Winter Corporation's taxable income is $500,000.In addition,Winter has the following items: $$\begin{array} { | l | r | } \hline \text { Depreciation for tax purposes } & \$ 60,000 \\\hline \text { Depreciation for financial accounting } & \\ \text { purposes } & 40,000 \\\hline \text { Net capital loss } & ( 2,000 ) \\\hline \text { Interest on loan to acquire tax-exempt } & \\ \text { securities } &7,000 \\\hline\end{array}$$ What is Winter's financial accounting income?

A)$511,000
B)$513,000
C)$518,000
D)$520,000

Question 67

Which of the following statements is correct?

A)Deferred tax assets/liabilities are always classified as current on the balance sheet.
B)The classification of deferred tax assets/liabilities depends on whether the related asset is current or noncurrent.
C)Deferred tax assets are classified based on their expected reversal dates.
D)Deferred tax assets/liabilities are classified as noncurrent on the balance sheet.

Question 68

Which of the following items is a permanent difference between taxable and financial accounting income?

A)depreciation
B)dividends-received deduction
C)bad debts
D)net capital loss

Question 69

Deferred tax liabilities occur when expenses are deductible for book purposes before tax purposes.

Question 70

Identify which of the following statements is false.

A)A corporation must file a tax return annually.
B)A corporation can obtain an automatic six-month extension of time to file its tax return.
C)The IRS will permit an extension of time to file a corporate return beyond the original due date only when the corporation's delay is reasonable.
D)The IRS can rescind the extension period.

Question 71

Which of the following items is a temporary difference between tax income and financial accounting income?

A)production activities deduction
B)proceeds on life insurance on a key executive
C)dividends-received deduction
D)depreciation

Question 72

Which of the following items indicate that a company does not need a valuation allowance?

A)existing sales contracts that will produce sufficient income to realize the deferred tax asset
B)excess of appreciated asset value over tax basis sufficient to realize the deferred tax asset
C)a strong history of earnings without considering the deferred tax asset
D)All of the above are correct.

Question 73

A deferred tax asset indicates that a firm will realize the tax benefit of an event sometime in the future.

Question 74

Dreyfuss Corporation reports the following items: Unappropriated retained earnings,beginning of year: $800,000
Net income: 700,000
Federal income tax refund for last year taken directly to retained earnings: 50,000
Cash dividends paid this year: 500,000
The unappropriated retained earnings at year-end are

A)$1,000,000.
B)$1,050,000.
C)$1,500,000.
D)$2,050,030.