Quiz 1: Taxation-Its Role in Decision Making

Which of the following is not considered to be a separate entity for tax purposes in Canada? A) Individuals B) Proprietorships C) Corporations D) Trusts

Which of the following attitudes and actions will help decision-makers develop an efficient approach to taxation? A) Cash flows should be considered from a before-tax perspective when making decisions. B) Functional managers should not be held responsible for the tax effects of decisions within their divisions. C) Tax costs to a business should be regarded as controllable expenses, much like product costs and selling costs. D) All managers should own a copy of the Income Tax Act.

Which of the following statements is true? A) Payment of the return on equity is deductible by the corporation and is a form of property income for the individual. B) Payment of the return on equity is deductible by the corporation and is a form of business income for the individual. C) Payment of the return on equity is not deductible by the corporation and is a form of business income for the individual. D) Payment of the return on equity is not deductible by the corporation and is a form of property income for the individual.

When assessing the value of a corporation,the most relevant information that decision-makers normally consider is A) the potential for before-tax profits. B) the potential for after-tax profits. C) the current rate of corporate tax. D) cash flow before-tax.

Income tax is calculated for which of the following jurisdictional groups? A) Municipal, provincial, and federal B) Municipal, federal, and international C) Provincial, federal, and international D) Municipal, provincial, and international

Two investor corporations may not enter jointly into which of the following? A) Joint venture B) Partnership C) Separate corporation D) Proprietorship

Which of the following statements is false? A) Cash flow should be calculated on an after-tax basis. B) The tax cost to a business should not be regarded as a cost of doing business. C) Income tax should be considered a controllable cost. D) The value of an enterprise should not be based on pre-tax cash flow.

tax jurisdictions.List the relevant variables within these four categories.

ABC Corporation is in a 25% income tax bracket.John Adams is an employee at ABC.He is in a 40% tax bracket.The company has offered John a 10% pay raise.His current salary is $50,000. Required: A)Calculate the after-tax cost of the raise to the corporation. B)Calculate the after-tax cost of the raise for John. Show all calculations.

Explain what is meant by the principle that tax should be treated as a 'controllable cost'.