Question 1

Which of the following is not considered to be a separate entity for tax purposes in Canada?&#10;A) Individuals&#10;B) Proprietorships&#10;C) Corporations&#10;D) Trusts

Accepted Answer

Proprietorships are not considered to be a separate legal entity from their owner, so they do not file separate tax returns. Instead, the owner reports the business income and expenses on their personal tax return. Individuals, corporations, and trusts are all considered separate entities for tax purposes and must file separate tax returns.

Question 2

ABC Corporation is in a 25% income tax bracket.John Adams is an employee at ABC.He is in a 40% tax bracket.The company has offered John a 10% pay raise.His current salary is $50,000.
Required:

A)Calculate the after-tax cost of the raise to the corporation.
B)Calculate the after-tax cost of the raise for John.
Show all calculations.

A)Actual cost to ABC: ($50,000  10%) (1 - .25)= $3,750
B)Actual value for John: ($50,000  10%) (1 - .4)= $3,000

Accepted Answer

A)Actual cost to ABC: ($50,000 &#61440; 10%) &#61440; (1 - .25)= $3,750&#10;B)Actual value for John: ($50,000 &#61440; 10%) &#61440; (1 - .4)= $3,000

Question 3

When assessing the value of a corporation,the most relevant information that decision-makers normally consider is&#10;A) the potential for before-tax profits.&#10;B) the potential for after-tax profits.&#10;C) the current rate of corporate tax.&#10;D) cash flow before-tax.

Accepted Answer

Decision-makers typically consider the potential for after-tax profits when assessing the value of a corporation. This is because after-tax profits represent the actual earnings of the corporation that can be distributed to shareholders or reinvested in the business. Before-tax profits and cash flow before-tax may not accurately reflect the true earnings of the corporation, as they do not take into account the impact of taxes. The current rate of corporate tax may be relevant information, but it is not the most important factor in determining the value of a corporation.

Question 4

Which of the following statements is false?&#10;A) Cash flow should be calculated on an after-tax basis.&#10;B) The tax cost to a business should not be regarded as a cost of doing business.&#10;C) Income tax should be considered a controllable cost.&#10;D) The value of an enterprise should not be based on pre-tax cash flow.

Accepted Answer

The tax cost to a business should be regarded as a cost of doing business, as it is a mandatory expense required by law. Therefore, statement B is false.

Question 5

tax jurisdictions.List the relevant variables within these four categories.

Accepted Answer

The answer of tax jurisdictions.List the relevant variables within these...

Question 6

Which of the following attitudes and actions will help decision-makers develop an efficient approach to taxation?&#10;A) Cash flows should be considered from a before-tax perspective when making decisions.&#10;B) Functional managers should not be held responsible for the tax effects of decisions within their divisions.&#10;C) Tax costs to a business should be regarded as controllable expenses, much like product costs and selling costs.&#10;D) All managers should own a copy of the Income Tax Act.

Accepted Answer

By regarding tax costs as controllable expenses, decision-makers can develop an efficient approach to taxation by identifying opportunities to minimize tax liabilities and optimizing tax benefits. Choices A, B, and D do not provide specific actions that can help decision-makers develop an efficient approach to taxation.

Question 7

Explain what is meant by the principle that tax should be treated as a 'controllable cost'.

Accepted Answer

The answer of Explain what is meant by the principle...

Question 8

Which of the following statements is true?&#10;A) Payment of the return on equity is deductible by the corporation and is a form of property income for the individual.&#10;B) Payment of the return on equity is deductible by the corporation and is a form of business income for the individual.&#10;C) Payment of the return on equity is not deductible by the corporation and is a form of business income for the individual.&#10;D) Payment of the return on equity is not deductible by the corporation and is a form of property income for the individual.

Accepted Answer

The return on equity, typically in the form of dividends, is not deductible for the corporation and is considered property income for the individual receiving it.

Question 9

Income tax is calculated for which of the following jurisdictional groups?&#10;A) Municipal, provincial, and federal&#10;B) Municipal, federal, and international&#10;C) Provincial, federal, and international&#10;D) Municipal, provincial, and international

Accepted Answer

Income tax is calculated for provincial, federal, and international jurisdictional groups. Municipalities do not have the authority to levy income tax.

Question 10

Two investor corporations may not enter jointly into which of the following?&#10;A) Joint venture&#10;B) Partnership&#10;C) Separate corporation&#10;D) Proprietorship

Accepted Answer

Two investor corporations cannot enter into a proprietorship because a proprietorship is owned and operated by a single individual, not by a corporation or multiple entities.

Deck 1: Taxation-Its Role in Decision Making