Devry ACCT Quiz 1-3

Devry ACCT Quiz 1-3 - Quiz 1 1. Question: (TCO 2) Tulip...

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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 Operating expenses Subtotal Dividend received Net capital gain ($45,000 – $15,000) Subtotal Dividends received deduction ($75,000 X 80%) Net profit 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:
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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 3. 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: 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 Fee paid to the state of incorporation Expenses in printing and sale of stock certificates Legal services for drafting the corporate charter and bylaws Total If Star Corporation makes a timely election under § 248 to amortize qualifying organizational expenses, how much may the corporation deduct for tax year 20xx? Your Answer:
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Instructor Explanation: Qualifying organizational expenditures include these items: Expenses of temporary directors and of organizational meetings Fee paid to the state of incorporation Legal services for drafting the corporate charter and bylaws Total Since an appropriate and timely election under § 248(c) was made, the amount that Star Corporation may write off for the tax year 2008 is determined as follows: (1) Immediate expensing of first $5,000 $5,000 (2) Amortization: [($24,000 – $5,000) ÷ 180] X 6 (months in tax year) 633 Total $5,633 Points Received: 0 of 2 5. Question:
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Devry ACCT Quiz 1-3 - Quiz 1 1. Question: (TCO 2) Tulip...

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