Kaplan University AC 507 Unit 2 Quiz

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.