Question 1

Pure Action Cycles Inc.,a bicycle manufacturer,has a net capital loss in 2018 of $64,000.It had net capital gains of $21,500 in 2017,$45,000 in 2016,$0 in 2015,and $8,000 of net capital gain in 2014.What is the net capital gain in 2017 after the carryback is applied?

Accepted Answer

The answer of Pure Action Cycles Inc.,a bicycle manufacturer,has a...

Question 2

Netgate Corporation's gross regular tax liability for the year was $95,375.What was its taxable income? Note: New Corporate income tax rate has been mentioned as "21% on all taxable income" as per the recent change.

Accepted Answer

The answer of Netgate Corporation's gross regular tax liability for...

Question 3

In 2018,Smith Traders Inc.reported a net operating loss of $100,000.In 2019,before the NOL deduction,it reported taxable income of $50,000.What is Smith Traders' 2019 taxable income after the NOL deduction and what is its NOL carryover to 2020?

Accepted Answer

The answer of In 2018,Smith Traders Inc.reported a net operating...

Question 4

Webtel Corporation donated $50,000 to a qualifying charity.For the year,it reported taxable income of $310,000,which included the following: the $50,000 charitable contribution (before limitation),a $100,000 dividends received deduction,and a $20,000 net operating loss carryover.What is Webtel Corp's charitable contribution deduction?

Accepted Answer

The answer of Webtel Corporation donated $50,000 to a qualifying...

Question 5

During the year,AutoUSA Inc.received $4,600,000 of book income,including $20,000 of interest income from tax-exempt municipal bonds.AutoUSA reported $3,600,000 of regular business expenses.If it made $200,000 of estimated tax payments (prepayments)throughout the tax year,what is its tax due or tax refund when it files its return?

Accepted Answer

The answer of During the year,AutoUSA Inc.received $4,600,000 of book...

Question 6

For book purposes,RadioAircast Inc.reported $15,000 of income from municipal bonds.It also expensed $12,000 of radio station filing fines paid to the FCC (a governmental agency)the same year.What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the total adjustment is permanent and what amount is temporary?

Accepted Answer

The answer of For book purposes,RadioAircast Inc.reported $15,000 of income...

Question 7

During 2018,Hughes Corporation sold a portfolio of stock it had held for five years at a loss of $200,000.It also sold some investment land and recognized a capital gain of $180,000.In 2016,Hughes reported a net capital gain of $12,000 and in 2015 it recognized a net capital gain of $6,000.What is the amount of its net capital loss carryover to 2019?

Accepted Answer

The answer of During 2018,Hughes Corporation sold a portfolio of...

Question 8

Datasoft Inc.received $350,000 in dividends from CSLabs Inc.Datasoft's taxable income before the dividends received deduction and $20,000 charitable contribution deduction is $300,000.What is Datasoft's DRD assuming it owns 15 percent of the CSLabs Inc.stock?

Accepted Answer

The answer of Datasoft Inc.received $350,000 in dividends from CSLabs...

Question 9

Carbonfab Manufacturers Inc.expensed $125,000 of depreciation for book purposes,but for tax purposes,it deducted $179,000.Carbonfab also sold equipment for $500,000.The book adjusted basis of the equipment sold was $350,000,while the adjusted basis for tax purposes was $210,000.What is the total book-tax difference associated with depreciation and the gain on sale? Is it favorable or unfavorable? What amount of the book-tax difference is permanent and what amount is temporary?

Accepted Answer

The answer of Carbonfab Manufacturers Inc.expensed $125,000 of depreciation for...

Question 10

AB Inc.received a dividend from CD Corporation and is able to claim the dividends received deduction without limitation.AB owns 30 percent of CD.What is AB's marginal tax rate (to the nearest tenth of a percent)on the dividends received (after taking the DRD into account)?

Accepted Answer

The answer of AB Inc.received a dividend from CD Corporation...

Question 11

AR Systems Inc.(AR)had $120,000 of tax liability last year.It anticipates a current-year tax liability of $500,000.Assuming AR is considered a large corporation for purposes of estimating tax liability,what are the minimum estimated tax payments it should make to avoid underpayment penalties? Ignore the annualized income method.

Accepted Answer

The answer of AR Systems Inc.(AR)had $120,000 of tax liability...

Question 12

US Sys Corporation received $250,000 in death benefits after its CEO (a key employee)died (it included this amount in book income).For book purposes,US Sys also expensed life insurance premiums for other key employees in the amount of $20,000.In addition,for book purposes,it expensed $10,000 of meal expense.What is the total book-tax difference associated with these items? Is it favorable or unfavorable? What amount of the book-tax difference is temporary and what amount is permanent?

Accepted Answer

The answer of US Sys Corporation received $250,000 in death...

Question 13

Imperial Construction Inc.(IC)issued 100,000 incentive stock options (ISOs)to its employees on December 31,2017 with an estimated value of $5.50 per option.The options vest at 25 percent per year for four years (beginning on December 31,2018).Each option allows the holder to purchase one share of stock at $8.On December 31,2018,employees exercised 12,500 options when IC's stock was valued at $14.72 per share.What is the amount of the book-tax difference in 2018 associated with the incentive stock options? Is it favorable or unfavorable? Is it temporary or permanent?

Accepted Answer

The answer of Imperial Construction Inc.(IC)issued 100,000 incentive stock options...

Question 14

On January 1,2015,Credit Inc.recorded goodwill valued at $270,000 when it acquired the assets of another company.At the end of 2016,the auditors of Credit Inc.determined that the goodwill had been impaired by $50,000 and Credit Inc.wrote down the book value of the goodwill by $50,000.During 2017,the goodwill was not impaired.In 2018,goodwill was impaired and was written down another $18,000 for financial reporting purposes.What is the temporary book-tax difference associated with the purchased goodwill in 2016,2017,and 2018? Are the differences favorable or unfavorable? Are the differences permanent or temporary?

Accepted Answer

The answer of On January 1,2015,Credit Inc.recorded goodwill valued at...

Question 15

In the current year,Auto Rent Corporation reported the following taxable income at the end of its first,second,and third quarters:
 $\begin{array} { l c } 
& \text { Curnulative Taxab } \
\text { Quarter }& \text { Income } \
\text { First } & \$ 1,500,000 \
\text { Second } & \$ 2,800,000 \
\text { Third } & \$ 3,600,000
\end{array}$ What amount of estimated tax payments would Auto Rent pay each quarter in order to avoid estimated tax penalties under the annualized income method of computing estimated tax payments?

Accepted Answer

The answer of In the current year,Auto Rent Corporation reported...

Quiz 12: Corporate Formations and Operations

Pure Action Cycles Inc.,a bicycle manufacturer,has a net capital loss in 2018 of $64,000.It had net capital gains of $21,500 in 2017,$45,000 in 2016,$0 in 2015,and $8,000 of net capital gain in 2014.What is the net capital gain in 2017 after the carryback is applied?

Netgate Corporation's gross regular tax liability for the year was $95,375.What was its taxable income? Note: New Corporate income tax rate has been mentioned as "21% on all taxable income" as per the recent change.

In 2018,Smith Traders Inc.reported a net operating loss of $100,000.In 2019,before the NOL deduction,it reported taxable income of $50,000.What is Smith Traders' 2019 taxable income after the NOL deduction and what is its NOL carryover to 2020?

Datasoft Inc.received $350,000 in dividends from CSLabs Inc.Datasoft's taxable income before the dividends received deduction and $20,000 charitable contribution deduction is $300,000.What is Datasoft's DRD assuming it owns 15 percent of the CSLabs Inc.stock?

AB Inc.received a dividend from CD Corporation and is able to claim the dividends received deduction without limitation.AB owns 30 percent of CD.What is AB's marginal tax rate (to the nearest tenth of a percent)on the dividends received (after taking the DRD into account)?