Sample Questions for Derivatives
1.Some financial instruments qualify as derivatives. Which of the following is the best description of a
A contract denominated in two different currencies
A contract that derives its value
Market Reaction and Value Relevance
1. What is Value Relevance?
a. The market share of a company compared to its peers.
b. The value of a company calculated with relevant numbers.
c. The association between accounting amounts and security
Foreign Currency Transactions and Translations
1. On September 22, Year 4, Run Corp. purchased merchandise from an unaffiliated foreign company for
10,000 units of the foreign company's local currency. On that date, the spot rate was $.55
Entities Taxation Case
Comparison of the Forms of Doing Business ( Assuming a 2016 Tax Year)
Davison Co. is in its first year of operations as a hardware and software retailer (with occasional
consulting jobs). Davidson reports the following 2016 r
FAIR VALUE ACCOUNTING
1. What is the main advantage of historical cost over fair value?
a. Historical cost is more useful for all fiancial instruments
b. Historical cost is verifiable
c. Historical cost is based on acquisition price
Court Filings - Appellate Briefs
Section 162 - Business Expenses
Tax Notes, Dec. 25, 2000, p. 1736
89 Tax Notes 1736 (Dec. 25, 2000)
UPS Insists Insurance Contracts Were Valid. In a reply brief for the Eleventh Circuit, United
Parcel Service (UPS)
Accounting is like a specialized field of scientific analysis. You must analyze every
aspect before making a decision as to how to solve a problem. I have often heard that
if you possess good observational, analytical and critical faculties you will becom
Sample Problems for Chapter 5-7
Chapter 5 E1 (Note: Chapter 5 E1 is similar problem to Chapter 1 E2)
E2. If the before-tax rate of return on a riskless fully taxable bond is 7% and the beforetax rate of return on a riskless tax-favored asset is
Explain the difference between a refundable tax credit and a nonrefundable
tax credit; giving examples of each and the tax impact of each.
Nonrefundable credits only offset tax liability. The taxpayer cannot obtain a
refund if the credit exce
Chapter 16 Discussion Questions
In a stock merger, target shareholders receive stock of the acquirer and are therefore subject to
additional risks than when they receive cash. Therefore, they may demand a premium for the costs
associated with receiving
Exercises (amounts in $ millions)
U.S. tax before FTC = 5000 x .35 =
FTC = min(1000 x .35, 280) =
U.S. tax after FTC =
Worldwide tax = 1470 + 280 =
U.S. tax before FTC =
FTC = min(1000 x .35, 200) =
U.S. tax after FTC
The ABC Corporation might set up the joint venture with another company as a flow through
entity (e.g. partnership) or C Corporation. The big advantage of a partnership as a flow-through
entity is that the losses expected from joint venture can offset
10 million. Neither subsidiary is consolidated tax consolidation requires 80% or more ownership.
DQ4. In Millers world, debt must pay a higher pretax return than equity because interest
income is taxed more severely at
Tax Planning Problems
In the US., municipalities are subject to tax on unrelated business income at corporate
tax rates. Moreover, municipalities can undertake profit-making ventures financed by tax-exempt
bonds. When the before-tax rate of r
Price willing to pay for the corporate bond is $1,000 (the face value). The bond promises a
coupon of 6% and the taxpayer requires a pretax rate of return of 6% as well. More formally
Price = present value of the coupon payments +
Municipalities can undertake some profit-making ventures that are tax advantageous for them. They can
issue tax-exempt securities to finance profit-making venture. The interest cost on those tax-exempt
securities is deductible from before tax profit
Firm 1: Expected marginal tax rate, E(mtr) = .50(40%) + .50(0%) = 20%
Firm 2: E(mtr) = .50(40%) + .50(0%) = 20%.
For firm 1, while the expected taxable income is a loss of $500,00 there is a 50%
chance of its mtr being 40% and a 50% chance of
Chapter 2 Answers:
a. If receive now and invest after-tax proceeds, the taxpayer will accumulate by the end
of next period
If defer receipt then after-tax will have
$110,000(1-t) = $75,9
DILUTIVE SECURITIES AND EARNINGS PER SHARE
IFRS questions are available at the end of this chapter.
TAKE HOME EXAM
Answer a total of 3 questions, one from each pair of 2.
The answers will be word processed on a single page, or two.
And e-mailed to me at [email protected]
By no later than noon on Monday September, 21
1 A. Corpor
Answer three questions: one from 1A or 1B, one from 2A or 2B. and question 3.
Bring word-process answers to in-class exam on Monday10/19
1.A. Corporation is a closely held C corporation. All of the stock is owned by 2 S/Hs. The c
Introduction to Federal Taxation and
Understanding the Federal Tax Law
TRUE-FALSE QUESTIONSCHAPTER 1
The majority of dollars collected by the U.S. government come by way of corporate taxation.
Prior to the Sixteenth Amendment direct
SWOT Threats 1. Threat 1 (description of threat 1) I would like to use competition a. How is this threat related to serving customers needs? b. How can the firm prevent this threat from limiting its capabilities in the shortand long- term? 2. Threat 2 (de