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Midterm_1

# Midterm_1 - ACC 330 Midterm Exam 1 Professor Lindsey Fall...

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ACC 330 – Midterm Exam 1 Professor Lindsey – Fall 2011 Part Total Points Your Score 1 15 2 10 3 25 4 25 5 25 Total 100 Bonus 3 Please show your work so I can award partial credit. Round percentages to two decimal places and dollar amounts to whole dollars.

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Part 1 (15 Points) 1. A. What is jurisdiction? B. State (write “yes” or “no”) whether or not the United States has jurisdiction. a. A Japanese citizen residing in Raleigh working for IBM b. A French citizen residing in South Africa that leases office space to a Brazilian utility c. A U.S. citizen residing in Rio De Janeiro the last 35 years who works for a Brazilian utility d. A Brazilian citizen residing in Rio de Janeiro that leases office space to IBM in Raleigh 2. Note the income tax rate schedule for single taxpayers in New York State for 2011: City tax rate schedule NY Income Tax Brackets Tax Bracket (yearly earnings) Tax Rate (%) \$0+ 4% \$8,000+ 5% \$13,000+ 6% \$20,000+ 7% \$200,000+ 8%
A. What is the New York state income tax liability for a single New York resident with taxable income of \$189,000? B. What is the average New York state income tax rate for this taxpayer? C. What is the marginal New York state income tax rate for this taxpayer? D. What is the tax rate structure for New York’s individual state income tax? E. Which of the four tax policy variables relates to tax rate structures? F. When New York raised taxes to cover its budget shortfall, would you expect this taxpayer to respond consistent with the income or substitution effect? Why? G. Which of the four tax policy variables relates to the income and substitution effects?

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Part 2 (10 Points) 1. Becon Fidant Corporation is planning a transaction that will generate \$100,000 of taxable income and cash inflow. The transaction is currently structured so that Becon Fidant Corporation will receive the cash and report the income in the current year (year 0) when the marginal tax rate is 35 percent. Compute the increase in the net present value of the transaction if it can be restructured so that Becon Fidant Corporation will receive the cash in the current year but report half of the income one year later (year 1) and the second half two years later (year 2) when the marginal tax rates decrease to 30 percent
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Midterm_1 - ACC 330 Midterm Exam 1 Professor Lindsey Fall...

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