Test Bank

Chapter One

Multiple Choice

1. Which of the following entities is not subject to taxation on income? A) Individuals B) Proprietorships C) Corporations D) Trusts Ans: B Difficulty: Knowledge recall Page Ref: 5

2. 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 position 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, just as product costs and selling costs are. D) All managers should own a copy of the income tax act.

Ans: C Difficulty: Comprehension Page Ref: 2

3. Which of the following statements is true? A) Payment of the return on equity is deductible by the payer and is a form of property income to the investor. B) Payment of the return on equity is deductible by the payer and is a form of business income to the investor. C) Payment of the return on equity is not deductible by the payer and is a form of business income to the investor. D) Payment of the return on equity is not deductible by the payer and is a form of property income to the investor. Ans: D

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Difficulty: Knowledge Page Ref: 4

4. When accessing 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. Ans: B Difficulty: Comprehension Page Ref: 4

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

Ans: C Difficulty: Comprehension Page Ref: 5

6. Two investor corporations may not enter jointly into which of the...