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1) Which of the following is not considered to be a separate entity for tax purposes in
Canada?
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A) An individual
B) A proprietorship
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C) A corporation
D) A trust
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2) Which of the following attitudes and actions is most likely to help decision-makers
develop an efficient approach to taxation?
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A) Cash flows should be considered from a before-tax perspective when making
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decisions.
B) Functional managers should not be held responsible for the tax effects of decisions
within their divisions.
N
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.
O
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3) Which of the following statements is true?
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A) Dividends paid by a corporation are deductible by that corporation and are a form of
property income for the recipient.
B) Dividends paid by a corporation are deductible by that corporation and are a form of
business income for the recipient.
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C) Dividends paid by a corporation are not deductible by that corporation and are a form
of business income for the recipient.
D) Dividends paid by a corporation are not deductible by that corporation and are a form
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of property income for the recipient.
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, 4) When assessing the value of a corporation, the most relevant information that decision-
makers normally consider is
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A) the potential for before-tax profits.
B) the potential for after-tax profits.
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C) the current corporate tax rate.
D) cash flow before-tax.
C
5) Two investor corporations may not enter jointly into which of the following?
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A) Joint venture
B) Partnership
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C) Separate corporation
D) Proprietorship
N
O
6) Income tax is calculated for which of the following jurisdictional groups?
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A) Municipal, provincial, and federal
B) Municipal, federal, and foreign
C) Provincial, federal, and foreign
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D) Municipal, provincial, and foreign
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7) Which of the following statements is true?
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, A) Cash flow should never be calculated on an after-tax basis.
B) The tax cost to a business should be regarded as a cost of doing business.
C) Income tax cannot be treated as a controllable cost.
D) The value of an enterprise should be based on pre-tax cash flow.
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8) 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?
A) The after-tax cost of the debt instrument is 5.11% to Glow Co., and the after-tax value
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to Logan is 3.85%.
B) The after-tax cost of the debt instrument is 5.11% to Glow Co., and the after-tax value
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to Logan is 3.15%.
C) The after-tax cost of the debt instrument is 1.89% to Glow Co., and the after-tax value
to Logan is 3.15%.
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D) The after-tax cost of the debt instrument is 7% to Glow Co., and the after-tax value to
Logan is 7%.
N
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9) Which of the following lists accurately names the five general income categories for tax
purposes?
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A) Business, Interest, Employment, Capital Gains, Other
B) Business, Property, Employment, Capital Gains, Foreign
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C) Business, Property, Employment, Capital Gains, Other
D) Business, Property, Employment, Investments, Other
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10) Proprietorships, corporations, partnerships, limited partnerships, joint ventures, and
income trusts are all
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, A) categories of income for tax purposes.
B) tax jurisdictions.
C) examples of financial instruments.
D) forms of business.
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11) Which of the following statements regarding taxation within jurisdictions in Canada is
true?
A) Federal and provincial or territorial tax brackets are always identical to one another.
C
B) Only federal taxes apply to individuals while both federal and provincial or territorial
taxes apply to corporations.
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C) Both federal and provincial or territorial taxes apply to Canadian taxpayers.
D) Only federal taxes apply to corporations while both federal and provincial taxes apply
to individuals.
N
N
12) Jamie is an employee at ABC Ltd. and is in a 45% tax bracket. ABC Ltd. has a tax rate of
27%. The company has offered Jamie a 10% pay raise. Jamie's current salary is $50,000. What is
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after-tax cost of the raise to ABC Ltd.?
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A) $1,350
B) $2,750
C) $2,858
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D) $3,650
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13) Simone is an employee at XYZ Ltd. and is in a 45% tax bracket. XYZ Ltd. has a tax rate
of 27%. The company has offered Simone a 10% pay raise. Simone's current salary is $50,000.
What is after-tax value of the raise to Simone?
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