FIN 534 Week 3 Quiz 2 Chapters 2 and 3

FIN 534 Week 3 Quiz 2 Chapters 2 and 3

FIN 534 Week 3 Quiz 2 Chapters 2 and 3
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FIN 534 Week 3 Quiz 2 Chapters 2 and 3

1. Which of the following statements is CORRECT?

a. The income of certain small corporations that qualify under the Tax Code is completely exempt from corporate income taxes. Thus, the federal government receives no tax revenue from these businesses.
b. All businesses, regardless of their legal form of organization, are taxed under the Business Tax Provisions of the Internal Revenue Code.

c. Small businesses that qualify under the Tax Code can elect not to pay corporate taxes, but then their owners must report their pro rata shares of the firm’s income as personal income and pay taxes on that income.

d. Congress recently changed the tax laws to make dividend income received by individuals exempt from income taxes. Prior to the enactment of that law, corporate income was subject to double taxation, where the firm was first taxed on the income and stockholders were taxed again on the income when it was paid to them as dividends.

e. All corporations other than non-profit corporations are subject to corporate income taxes, which are 15% for the lowest amounts of income and 35% for the highest amounts of income.

2. Analysts who follow Howe Industries recently noted that, relative to the previous year, the company’s operating net cash flow increased, yet cash as reported on the balance sheet decreased. Which of the following factors could explain this situation?

a. The company cut its dividend.

b. The company made a large investment in a profitable new plant.

c. The company sold a division and received cash in return.

d. The company issued new common stock.

e. The company issued new long-term debt.

3. Assume that Congress recently passed a provision that will enable Bev's Beverages Inc. (BBI) to double its depreciation expense for the...

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