1. Award:
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:
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:
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:
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:
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:
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:
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:
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:
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.
10. Award:
Proprietorships, corporations, partnerships, limited partnerships, joint ventures, and income trusts are all
categories of income for tax purposes.
tax jurisdictions.
examples of financial instruments.
forms of business.
This list comprises the many forms of businesses that may be created.
11. Award:
Which of the following statements regarding taxation within jurisdictions in Canada is true?
Federal and provincial or territorial tax brackets are always identical to one another.
Only federal taxes apply to individuals while both federal and provincial or territorial taxes apply to corporations.
Both federal and provincial or territorial taxes apply to Canadian taxpayers.
Only federal taxes apply to corporations while both federal and provincial taxes apply to individuals.
Canadian taxpayers are subject to both federal and provincial or territorial taxes, and the schedule of rates for the latter differs per jurisdiction.
12. Award:
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 after-tax cost of the raise to ABC Ltd.?
$1,350
$2,750
$2,858
$3,650
After-tax cost to ABC Ltd.: ($50,000 × 10%) × (1 - .27) = $3,650.
, 13. Award:
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?
$1,350
$2,750
$2,858
$3,650
After-tax value for Simone: ($50,000 × 10%) × (1 - .45) = $2,750.
14. Award:
All cash flow must be considered on an after-tax basis because
companies want a positive cash flow.
the value to a business must be considered.
the investor's tax rate is irrelevant.
decisions that appear favourable on a pre-tax basis may be unfavorable or marginally favourable on an after- tax basis.
Taxes must form part of the cash flow decision.
15. Award:
Which of the following is not a separate entity for tax purposes?
Corporation
Trust
Partnership
Individual
The individual partner is taxed on their share of the partnership income.
16. Award:
The Canadian income tax system is considered
progressive.
regressive.
flat.
unfair.
The Canadian income tax system is considered progressive because the rate of tax on marginal income gets progressively higher.
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:
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:
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:
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:
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:
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:
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:
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:
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.
10. Award:
Proprietorships, corporations, partnerships, limited partnerships, joint ventures, and income trusts are all
categories of income for tax purposes.
tax jurisdictions.
examples of financial instruments.
forms of business.
This list comprises the many forms of businesses that may be created.
11. Award:
Which of the following statements regarding taxation within jurisdictions in Canada is true?
Federal and provincial or territorial tax brackets are always identical to one another.
Only federal taxes apply to individuals while both federal and provincial or territorial taxes apply to corporations.
Both federal and provincial or territorial taxes apply to Canadian taxpayers.
Only federal taxes apply to corporations while both federal and provincial taxes apply to individuals.
Canadian taxpayers are subject to both federal and provincial or territorial taxes, and the schedule of rates for the latter differs per jurisdiction.
12. Award:
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 after-tax cost of the raise to ABC Ltd.?
$1,350
$2,750
$2,858
$3,650
After-tax cost to ABC Ltd.: ($50,000 × 10%) × (1 - .27) = $3,650.
, 13. Award:
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?
$1,350
$2,750
$2,858
$3,650
After-tax value for Simone: ($50,000 × 10%) × (1 - .45) = $2,750.
14. Award:
All cash flow must be considered on an after-tax basis because
companies want a positive cash flow.
the value to a business must be considered.
the investor's tax rate is irrelevant.
decisions that appear favourable on a pre-tax basis may be unfavorable or marginally favourable on an after- tax basis.
Taxes must form part of the cash flow decision.
15. Award:
Which of the following is not a separate entity for tax purposes?
Corporation
Trust
Partnership
Individual
The individual partner is taxed on their share of the partnership income.
16. Award:
The Canadian income tax system is considered
progressive.
regressive.
flat.
unfair.
The Canadian income tax system is considered progressive because the rate of tax on marginal income gets progressively higher.
