AC 507 Unit 1 Quiz

1. Question : What is a corporation’s alternative minimum tax rate?

Student Answer: 15%

20%

26%

28%

2. Question : Which of the following business entities does not file a separate tax return to report business operations?

Student Answer: Sole proprietorship

S corporation

C corporation

Partnership

3. Question : Hoku Corporation (a C corporation) had the following history of income and loss:
Year Income (Loss)
2009 $40,000
2010 $70,000
2011 ($10,000)
How much of a tax refund can Hoku Corporation receive by carrying back its 2011 loss?

Student Answer: $1,500

$2,500

$3,500

None; it cannot carry its loss back

4. Question : Which of these persons never pays taxes directly?

Student Answer: Individual

Partnership

C corporation

Fiduciary

5. Question : Which of the following is not a characteristic of an S corporation?

Student Answer: Owners have limited liability

The corporation is taxed directly on operating income

The corporation can have no more than 100 shareholders

Shareholders must consent to the S election by the corporation

6. Question : The Mercury Corporation must decide whether to invest in some new machinery for its business. Which tax rate is the most relevant for making this decision?

Student Answer: The average tax rate

The marginal tax rate

The nominal tax rate

The effective tax rate

7. Question : What is the gain or loss on the sale of an asset for $68,000 if the asset cost $185,000, depreciation expense deducted was $124,000, repair costs were $12,000, and there was a $19,000 major addition to the asset?

Student Answer: $0

$12,000 loss

$7,000 gain

$24,000 loss