Question 1

Which of the following statements is correct regarding the taxation of C corporations?

Accepted Answer

A)  Schedule M-2 is used to reconcile net income as computed for financial accounting purposes with taxable income reported on the corporation's tax return.
B)  The corporate return is filed on Form 1120S.
C)  Corporations can receive an automatic extension of nine months for filing the corporate return by filing Form 7004 by the due date for the return.
D)  A corporation with total assets of $7.5 million or more is required to file Schedule M-3.
E)  None of the above.F) A) and D)
G) B) and E)

Question 2

Hippo, Inc., a calendar year C corporation, manufactures golf gloves.For 2012, Hippo had taxable income (before DPAD)  of $900,000, qualified domestic production activities income of $750,000, and W-2 wages related to qualified production activities income of $140,000.Hippo's domestic production activities deduction for 2012 is:

Accepted Answer

A)  $0.
B)  $12,600.
C)  $67,500.
D)  $70,000.
E)  None of the above.F) A) and C)
G) A) and E)

Question 3

Schedule M-2 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.

Accepted Answer

A) True 
 B)False

Question 4

As a general rule, a personal service corporation (PSC) must use a calendar year as its accounting period.

Accepted Answer

A) True 
 B)False

Question 5

Norma formed Hyacinth Enterprises, a proprietorship, in 2012.In its first year, Hyacinth had operating income of $400,000 and operating expenses of $240,000.In addition, Hyacinth had a long-term capital loss of $10,000.Norma, the proprietor of Hyacinth Enterprises, withdrew $75,000 from Hyacinth during the year.Assuming Norma has no other capital gains or losses, how does this information affect her taxable income for 2012?

Accepted Answer

A)  Increases Norma's taxable income by $157,000 ($160,000 ordinary business income - $3,000 long-term capital loss) .
B)  Increases Norma's taxable income by $150,000 ($160,000 ordinary business income - $10,000 long-term capital loss) .
C)  Increases Norma's taxable income by $75,000.
D)  Increases Norma's taxable income by $160,000.
E)  None of the above.F) A) and E)
G) D) and E)

Question 6

Crow Corporation, a C corporation, donated scientific property (basis of $30,000, fair market value of $50,000) to State University, a qualified charitable organization, to be used in research.Crow had held the property for four months as inventory. Crow Corporation may deduct $50,000 for the charitable contribution (ignoring the taxable income limitation).

Accepted Answer

A) True 
 B)False

Question 7

Briefly describe the accounting methods available for adoption by a C corporation.

Accepted Answer

In general, a C corporation must adopt t...

Question 8

Flycatcher Corporation, a C corporation, has two equal individual shareholders, Nancy and Pasqual. In the current year, Flycatcher earned $100,000 net profit and paid a dividend of $10,000 to each shareholder. Regardless of any tax consequences resulting from their interests in Flycatcher, Nancy is in the 33% marginal tax bracket and Pasqual is in the 15% marginal tax bracket. With respect to the current year, which of the following statements is incorrect?

Accepted Answer

A)  Flycatcher cannot avoid the corporate tax altogether by paying out all $100,000 of net profit as dividends to the shareholders.
B)  Nancy incurs income tax of $1,500 on her dividend income.
C)  Pasqual incurs income tax of $1,500 on his dividend income.
D)  Flycatcher pays corporate tax of $22,250.
E)  None of the above.F) A) and B)
G) None of the above

Question 9

Elk, a C corporation, has $370,000 operating income and $290,000 operating expenses during the year.In addition, Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss.Elk's taxable income is:

Accepted Answer

A)  $63,000.
B)  $73,000.
C)  $80,000.
D)  $90,000.
E)  None of the above.F) A) and E)
G) A) and C)

Exam 17: Corporations: Introduction and Operating Rules

Correct Answer
verified

Correct Answer
verified

As a general rule, a personal service corporation (PSC) must use a calendar year as its accounting period.

Correct Answer
verified

Correct Answer
verified

Elk, a C corporation, has $370,000 operating income and $290,000 operating expenses during the year.In addition, Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss.Elk's taxable income is:

Correct Answer
verified

Schedule M-2 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.

Correct Answer
verified

Briefly describe the accounting methods available for adoption by a C corporation.

Correct Answer
verified
In general, a C corporation must adopt t...
View Answer

Which of the following statements is correct regarding the taxation of C corporations?

Correct Answer
verified

Correct Answer
verified

Exam 17: Corporations: Introduction and Operating Rules

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

As a general rule, a personal service corporation (PSC) must use a calendar year as its accounting period.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Elk, a C corporation, has $370,000 operating income and $290,000 operating expenses during the year.In addition, Elk has a $10,000 long-term capital gain and a $17,000 short-term capital loss.Elk's taxable income is:

Correct AnswerverifiedShow Answer

Schedule M-2 is used to reconcile unappropriated retained earnings at the beginning of the year with unappropriated retained earnings at the end of the year.

Correct AnswerverifiedShow Answer

Briefly describe the accounting methods available for adoption by a C corporation.

Correct AnswerverifiedIn general, a C corporation must adopt t...View AnswerShow Answer

Which of the following statements is correct regarding the taxation of C corporations?

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
In general, a C corporation must adopt t...
View Answer

Correct Answer
verified

Correct Answer
verified