Name _____________________________________________ Bonus Exam –

 

READ Requirements Carefully!

 

1. Economic Nexus relates to

a) A new way for states to connect to transactions in order to collect tax

b) A way to research law related matters

c) A connection for sales tax transactions only

d) None of the above

 

2. ABC in order of transaction: purchases 5 units of inventory at a $1,000/unit. Then ABC purchases 4 units at $1,100/unit Then Sells 2 units of inventory at a price of $1,500/unit. The Lower of Cost or Market suggests a replacement cost at the balance sheet date of $1,050/unit. ABC uses perpetual LIFO. Book all entries

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3. ABC manufacturers custom guitars for sale. ABC purchases a machine that will be used to shape guitars on 1/1/2018 for $300,000. The machine has a 6-year life with no salvage value. Book the entry on 1/1 and 12/31. The machine is only to be used in the manufacturing process.

 

 

 

 

 

 

 

 

 

 

 

 

 

4. ABC purchases 3 investments on 9/1/2018. Stock of BCD for $10,000 that has a fair–value of $13,000 at year-end. Bonds of BCD for $10,000 that have a fair value of $10,500 at year-end. These bonds are considered available for sale. Bonds of CDE Company which were purchased on a bond market for $6,000 that have a year-end fair value of $9,000. These bonds are being held to maturity. Sales for ABC are 120,000. The only expense is salaries for 55,000. Dividends are $500 and total bond revenues are $1,000. Assume a tax rate of 20%. Prepare an income statement (in good form) for ABC. Show investment account balance that would be shown on balance sheet at 12/31/18.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5. ABC owns 30% of D Company. ABC and D have the following: Revenues of $90,000/30,000; COGS $40,000/12,000; SGA 10,000/3,000. ABC pays a dividend of $10,,000 and D pays a dividend of 5,000. Tax rate of 20%. Prepare an income statement for ABC

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

6.

a. Brief ASC 2016-1 (1 page (minimum) document)

 

 

7. An exemption certificate

a) allows a transaction to be treated as taxable

b) allows a seller with nexus not to have to collect sales tax

c) allows a buyer to remit use tax

d) allows a transaction to be treated as non-taxable for income tax purposes

 

 

 

 

8. Mack Corporation, a U.S. corporation,

reported total taxable income of $5 million.

Taxable income included $1.5 (as translated)

million of foreign source taxable income from

a company’s branch. All of the branch income

is foreign branch income. Mack paid Canadian

income taxes of $375,000 (as translated) on its

branch income. Compute Mackinac’s

allowable foreign tax credit

 

 

 

 

9. ABC Corporation is domiciled in X jurisdiction. X

jurisdiction uses a double weighted sales to

determine apportionment. Sales to X jurisdiction is

250,000. Sales everywhere else is 1,180,637.

Rental in X cost us $100,000. Federal TI is $500,000

and there are no state adjustments to this amount.

$50,000 of the $500,000 is the total allocable

income but only $32,000 is allocable to jurisdiction

X. Jurisdiction X’s tax rate is 8.25%. What is state

tax payable to X?

 

 

 

 

 

 

 

 

 

10. Sales 480,000

COGS 40,000

Muni Interest revenue 20,000

Salaries 80,000

Rent expense 12,000

Supplies Expense 8,000

R&D expense 15,000

Depreciation 35,000 (for tax it is going to be $60,000)

Meals Expense 12,000

Dividend Revenue from a 10% owned company 20,000

Tax Rate is 21%

1. Prepare an income statement (per GAAP) in good format

2. Book Tax Journal Entries

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