1. All of the following are part of the tax research process except: (Points : 1)
Establish the facts
Locate relevant authority
Identify the issues
Communicate the findings
All are part of the tax research process
2. CK Corporation can invest $100,000 in a project. After taxes, the project is expected to generate $40,000 of net income the first year and $75,000 of net income the second year. If the company uses a 10 percent discount rate to evaluate projects, what is the project’s net cash flow? (Points : 1)
$15,000
$1,690
($1,690)
($1,315)
3. Changing which of the following factors as indicated would decrease the after-tax net cash flow of a project: (Points : 1)
Delaying the years in which inflows occur
Delaying revenue recognition
Increasing the discount rate
All decrease cash flows
None decrease cash flows
4. What effect does an increased discount rate have on project evaluations? (Points : 1)
Increases net cash flow
Decreases net cash flow
Increases the probability that a project will be accepted
It has no effect on project evaluation
5. Which of the following does not deal with a CPA’s standard of conduct (Points : 1)
Treasury Circular 230
AICPA Code of Conduct
Internal Revenue Service Manual
Statement of Standards for Tax Services
6. Which of the following explain why it is important to determine the period in which income is recognized? (Points : 1)
Marginal tax rates may be different in different periods.
Tax laws may change
The time value of money
All of the above are explanations
a. and b. only are explanations
7. All of the following are allowable tax years except: (Points : 1)
The last Friday of July
December 31
The Sunday closest to March 1
August 31
8. All of the following are acceptable methods of accounting for revenue and expenses for tax purposes except: (Points : 1)
Cash method
Accrual method
Percentage-of-completion
Hybrid method
All are acceptable methods
9. Which of the following is an application of the wherewithal-to-pay concept? (Points : 1)
Percentage-of-completion
Hybrid method of accounting
Installment method
Accrual method of accounting
10. Windjammer Corporation, a cash-basis, calendar-year corporation sold $30,000 of merchandise to Jackpot Company in January, year 1. In November, Jackpot declared bankruptcy without paying Windjammer. In year 4, Jackpot had reorganized under a new owner and paid all its old debts including the $30,000 owed Windjammer. How does Windjammer treat these events? (Points : 1)
Recognize $30,000 revenue in year 1 only.
Recognize $30,000 revenue in year 4 only.
Deduct $30,000 as a bad debt in year 1.
Deduct $30,000 as a bad debt in year 1; recognize $30,000 income in year 4.
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