Exam (elaborations)

Canadian Income Taxation , Planning and Decision Making, 26th Edition, Buckwold, Kitunen, Roman, Iqbal - Test Bank - All Chapters Covered

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Canadian Income Taxation

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Holland College ( )

Test Bank For Canadian Income Taxation / Canadian Income Taxation 2024/2025, 26th Edition Test Bank / Test Bank For Canadian Income Taxation Planning and Decision Making, 26th Edition Test Bank / William Buckwold, Joan Kitunen, Matthew Roman, Abraham Iqbal, 9781266002724, Test Bank

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Uploaded on December 30, 2024
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canadian income taxation
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TEST BANK

Canadian Income Taxation 2024-2025
26th EDITION

Chapter 1: Taxation—Its Role in Decision Making

1. Award: 10.00 points

Which of the following is not considered to be a separate entity for tax purposes in Canada?

 An individual

 A proprietorship

 A corporation

 A trust

A proprietorship is correct as the entities subject to tax on income in Canada are individuals,
corporations, and trusts.

2. Award: 10.00 points

Which of the following attitudes and actions is most likely to help decision-makers develop an
efficient approach to taxation?

 Cash flows should be considered from a before-tax perspective when making decisions.

 Functional managers should not be held responsible for the tax effects of decisions within
their divisions.

 Tax costs to a business should be regarded as controllable expenses, much like product
costs and selling costs.

 All managers should own a copy of the Income Tax Act.

Taxation should be considered in all aspects of business planning on an ongoing basis.

,3. Award: 10.00 points

Which of the following statements is true?

 Dividends paid by a corporation are deductible by that corporation and are a form of
property income for the recipient.

 Dividends paid by a corporation are deductible by that corporation and are a form of
business income for the recipient.

 Dividends paid by a corporation are not deductible by that corporation and are a form of
business income for the recipient.

 Dividends paid by a corporation are not deductible by that corporation and are a form of
property income for the recipient.

Dividends are paid from after-tax corporate income and are not a deductible expense. Dividends
received by individuals are a form of property income.

4. Award: 10.00 points

When assessing the value of a corporation, the most relevant information that decision-makers
normally consider is

 the potential for before-tax profits.

 the potential for after-tax profits.

 the current corporate tax rate.

 cash flow before-tax.

Decision-making should always address the after-tax values.

,5. Award: 10.00 points

Income tax is calculated for which of the following jurisdictional groups?

 Municipal, provincial, and federal

 Municipal, federal, and foreign

 Provincial, federal, and foreign

 Municipal, provincial, and foreign

Canadian taxpayers are usually subject to provincial, federal, and foreign tax on international
income.

6. Award: 10.00 points

Two investor corporations may not enter jointly into which of the following?

 Joint venture

 Partnership

 Separate corporation

 Proprietorship

A proprietorship, since it is an operation run by one individual.

7. Award: 10.00 points

Which of the following statements is true?

 Cash flow should never be calculated on an after-tax basis.

 The tax cost to a business should be regarded as a cost of doing business.

 Income tax cannot be treated as a controllable cost.

 The value of an enterprise should be based on pre-tax cash flow.

Tax costs are a regular part of doing business and therefore have an impact on cash flow.

, 8. Award: 10.00 points

Logan holds a 7% interest-bearing debt instrument in Glow Co. Glow Co.'s tax rate is 27%, and
Logan is in a 45% tax bracket. Which of the following statements is correct?

 The after-tax cost of the debt instrument is 5.11% to Glow Co., and the after-tax value to
Logan is 3.85%.

 The after-tax cost of the debt instrument is 5.11% to Glow Co., and the after-tax value to
Logan is 3.15%.

 The after-tax cost of the debt instrument is 1.89% to Glow Co., and the after-tax value to
Logan is 3.15%.

 The after-tax cost of the debt instrument is 7% to Glow Co., and the after-tax value to
Logan is 7%.

.07 × (1 - .27) = 5.11%
.07 × (1 - .45) = 3.85%.

9. Award: 10.00 points

Which of the following lists accurately names the five general income categories for tax purposes?

 Business, Interest, Employment, Capital Gains, Other

 Business, Property, Employment, Capital Gains, Foreign

 Business, Property, Employment, Capital Gains, Other

 Business, Property, Employment, Investments, Other

Income for tax purposes is categorized as Business, Property, Employment, Capital Gains, and
Other.

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Exam (elaborations)

Canadian Income Taxation , Planning and Decision Making, 26th Edition, Buckwold, Kitunen, Roman, Iqbal - Test Bank - All Chapters Covered

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