Acct 424 Quiz 1&2a

Acct 424 Quiz 1&2a - Quiz 1 1...

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Quiz 1 1. Question: (TCO 2) Tulip Corporation had $750,000 operating income and $510,000  operating expenses during the year.  Tulip, which owns 25% of Daisy, Inc.’s  stock, received a $75,000 dividend from Daisy.  Tulip also had a $45,000  long-term capital gain and a $15,000 short-term capital loss.  Compute Tulip’s  taxable income for the year. Your Answer: $240,000. $270,000. $285,000. CORRECT ANSWER $292,500. None of the above. INCORRECT Instructor Explanation: Operating income $750,000  Operating expenses (510,000 )    Subtotal $240,000  Dividend received 75,000  Net capital gain ($45,000 – $15,000)         30,000          Subtotal $345,000  Dividends received deduction ($75,000 X 80%)     (60,000     ) Net profit $285,000   Points Received: 0 of 2 2. Question: (TCO 2) Orange Corporation owns stock in White Corporation and has net  operating income of $800,000 for the year.  White Corporation pays Orange a  dividend of $300,000.  What amount of dividends received deduction may  Orange claim if it owns 18% of White stock (assuming Orange’s dividends  received deduction is not limited by its taxable income)? Your Answer: $0. $210,000. CORREC T $240,000. $300,000. None of the above. Instructor Explanation: The dividends received deduction depends upon the percentage of ownership  by the corporate shareholder.  If Orange Corporation owns 18% of White  Corporation, Orange would qualify for a 70% deduction, or $210,000 in this  case.   Points Received: 2 of 2
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Question: (TCO 2) Intergalactic Corporation, a personal service corporation, had  $50,000 of active income, $90,000 of portfolio income, and a $160,000  passive loss during the year.  How much of the passive loss is deductible? Your Answer: $0. CORREC T $50,000. $90,000. $160,000. None of the above. Instructor Explanation: A personal service corporation may not offset passive loss against active  income or portfolio income.   Points Received: 2 of 2 4. Question: (TCO 2) Star Corporation, a cash basis and calendar year taxpayer, was  formed and began operations on July 1, of the current year.  Star incurred the  following expenses during its first year of operations (July 1-December 31,  20xx): Expenses of temporary directors and of organizational  meetings $15,000 Fee paid to the state of incorporation 3,000 Expenses in printing and sale of stock certificates 5,000 Legal services for drafting the corporate charter and  bylaws         6,000     Total $29,000 If Star Corporation makes a timely election under § 248 to amortize qualifying  organizational expenses, how much may the corporation deduct for tax year  20xx?
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Acct 424 Quiz 1&2a - Quiz 1 1...

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