Income Tax questions Quiz: Chapt 1 End of Chapter Problems

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Question 1 0.25 pts
Jim probably will be required to pay the Washington Use Tax if and when he applies for Washington state license plates which is the same rate as the
sales tax.
Jim probably will be required to pay the Washington Use Tax if and when he applies for Oregon state license plates which is the same rate as the
sales tax.
Jim probably will be required to pay the Washington Use Tax if and when he applies for Washington state license plates which is twice the rate as the
sales tax.
Jim probably will not be required to pay the Washington Use Tax if and when he applies for Washington state license plates which is the same rate as
the sales tax.
Prob. 5. Jim, a resident of Washington State, ( which imposes a general sales tax) goes to Oregon (which does not impose a general sales tax) to purchase his
automobile. Will Jim successfully avoid the Washington sales tax? Explain.
Question 2 0.25 pts
Trinity Lutheran Church
DPS
Baker Motors
Don't sell.
Prob. 6 The Irontown Independent School District wants to sell a parcel of unimproved land that it does not need. Its three best offers are as follows: from the
State Department of Public Safety (DPS), $4.3 million; Trinity Lutheran Church, $4.2 million; and from Baker Motors , $3.9 million. DPS would use the property for a
new State Highway Patrol barracks. Trinity would start a church school and Baker would open a car dealership. As the financial advisor for the school district, which
would you prefer? Why?.
Question 3 0.25 pts
Prob. 10 - Ashley runs a small business in Boulder, Colorado, that makes snow skis. She expects the business to grow substantially over the next three years.
Because she is concerned about product liability and is planning to take the company public in 2016, she is currently considering incorporating the business.
Financial data are as follows.
2015 2016 2017
Sales revenue $150,000 $320,000 $600,000
Tax-free interest income 5,000 8,000 15,000
Deductible cash expenses 30,000 58,000 95,000
Tax depreciation 25,000 20,000 40,000
Ashley expects her combined Federal and state marginal income tax rate to be 35% over the next three years before any profits from the business are considered.
Her after-tax cost of capital is 12%.
Compute the present value of the future cash flows for 2015 to 2017 assuming that Ashley incorporates the business and pays all after-tax income as dividends
(for Ashley's dividends that qualify for the 15% rate).
1.
Quiz: Chapt 1 End of Chapter Problems https://cwu.instructure.com/courses/21580/quizzes/37331/take?...
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Not saved
a $427,586, b. $482,936, c. If she wants all income distributed don't incorporate.
a $428,586, b. $483,936, c. If she wants all income distributed don't incorporate.
a $483,936,, b. $428,586, c. If she wants all income distributed need to incorporate.
a $428,896, b. $473,936, c. If she wants all income distributed don't incorporate.
2. Compute the present value of the future cash flows for 2015 to 2017 assuming that Ashley continues to operate the business as a sole proprietorship.
3. Should Ashley incorporate the business this year? Why or why not?
Question 4 0.25 pts
39%, 22% and 19%
39%, 23% and 20%
38%, 23% and 21%
39%, 20% and 23%
Prob. 11. Mauve Supplies, Inc. reports total income of $120,000. The corporation’s taxable income is $105,000. What are Mauve’s marginal, average and
effective tax rates?
Question 5 0.25 pts
a. Social b. Social /Economic c. Political /Equity d. Social e. Equity f. Polititcal g. Political h. Social
a. Social b. Political c. Political /Equity d. Social e. Political f. Wherewithal to pay g. Political h. Wherewithal to pay
a. Social b. Social/Economic c. Political/Equity d. Social e. Equity f. Wherewithal to pay g. Political h. Wherewithal to pay
a. Equity b. Social /Economic c. Political /Equity d. Social e. Equity f. Political g. Political h. Wherewithal to pay
Prob. 14. Discuss the probable justification for each of the following aspects of the tax law.
a. A tax credit is allowed for amounts spent to furnish care for minor children while the parent works.
b. Deductions for interest on home mortgage and property taxes on one's personal residence.
c. The income splitting benefits of filing a joint return.
d. Gambling losses in excess of gambling gains.
e. Net operating losses of a current year can be carried back to profitable years.
f. A taxpayer who sells property on an installment basis can recognize gain on the sale over the period the payments are received.
g. The exclusion from Federal tax of certain interest income from state and local bonds.
h. Prepaid income is taxed to the recipient in the year it is received and not in the year it is earned.
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Quiz: Chapt 1 End of Chapter Problems https://cwu.instructure.com/courses/21580/quizzes/37331/take?...
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