FiltersDone

Question type

Essay

Multiple Choice

Short Answer

True False

Matching

Exam 16: Corporate Operations

Show Answer

Share

---

All types

Filters

Study FlashcardsPractice ExamLearn

Question 61

Multiple Choice

Review LaterAdd Note

Review Later

Orange Incorporated issued 20,000 nonqualified stock options valued at $40,000 (in total) . The options vest over two years-half in 2020 (the year of issue) and half in 2020. One thousand options are exercised in 2021 with a bargain element on each option of $6. What is the 2021 book-tax difference associated with the stock options?

A) $14,000 unfavorable.
B) $6,000 favorable.
C) $24,000 unfavorable.
D) $24,000 favorable.
E) None of the choices are correct.

F) A) and D)
G) None of the above

Correct Answer

verified

Show Answer

Question 62

Multiple Choice

Review LaterAdd Note

Review Later

AmStore Incorporated sold some of its heavy machinery at a gain. AmStore used the straight-line method for financial accounting depreciation andimmediate expensing 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.

E) All of the above
F) C) and D)

Correct Answer

verified

Show Answer

Question 63

True/False

Review LaterAdd Note

Corporations compute their dividends received deduction by multiplying the dividend amount by 10 percent, 50 percent, or 100percent, depending on their ownership in the distributing corporation's stock.

Which of the following statements regarding capital gains and losses is false?

Jazz Corporation owns 10 percent of the Mitchell Corporation stock. Mitchell distributed a $13,400 dividend to Jazz Corporation. Jazz Corporation's taxable income (loss) before the dividend was ($7,500) . What is the amount of Jazz's dividends received deduction on the dividend it received from Mitchell Corporation?

A corporation may carry a net capital loss forward five years to offsetnet capital gains in future years but it may not carry a net capital loss back to offsetnet capital gains in previous years.

Most corporations use the annualized income method to determine their required annual payment for purposes of making quarterly estimated payments.

The dividends received deduction cannot create a net operating loss. The deduction can reduce income to zero but not below zero.

For tax purposes, companies using nonqualified stock options deduct expenses in the year the options are exercised.

In a given year, Adams Corporation has goodwill impairment in excess of the allowable amortization for tax purposes. Adams has a favorable temporary book-tax difference for that year.

Coop Incorporated owns 40percent of Chicken Incorporated. Both Coop and Chicken are corporations. Chicken pays Coop a dividend of $10,000 in the current year. Chicken also reports financial accounting earnings of $20,000 for that year. Assume 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) ?

Corporations may carry excess charitable contributions forward five years, but they may not carry them back.

In 2020, Carbonfab Manufacturers Incorporated 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?

iScope Incorporated 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?

Tatoo Incorporated reported a net capital loss of $13,000 in 2020. The company had a net capital gain of $4,300 in 2018 and $3,000 in 2017. In 2019, although the company suffered a net operating loss, it had net capital gains of $1,000. What is the amount of Tatoo's capital loss carryover to 2021 remaining after it applies the carryback?

A C corporation reports its taxable income or loss on Form 1065.

Orange Incorporated issued 28,500 nonqualified stock options valued at $57,000 (in total) . The options vest over two years-half in 2020 (the year of issue) and half in 2020. One thousand options are exercised in 2021 with a bargain element on each option of $7. What is the 2021 book-tax difference associated with the stock options?

Which of the following statements is false regarding consolidated tax returns?

Remsco has taxable income of $77,000 and a charitable contribution limit modified taxable income of $80,500. Its charitable contributions for the year were $8,180. What is Remsco's current-year charitable contribution deduction and contribution carryover(assuming Remsco does not elect to use the 25% of modified taxable income to determine its charitable contribution deduction) ?

Jazz Corporation owns 10percent of the Mitchell Corporation stock. Mitchell distributed a $10,000 dividend to Jazz Corporation. Jazz Corporation'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 Mitchell Corporation?