Chapter 8 Random Flashcards
The book value of an asset can be best defined as:
(1) the purchase price of that asset less any depreciation taken to date.
(2) the price for which a similar asset could currently be purchased in the market.
(3) the price for which that asset could be sold.
(4) a value which is subjectively arrived at by an appraiser.
1
To calculate income taxes payable for a corporation:
(1) depreciation expense cannot be treated as a deductible expense.
(2) capital cost allowance cannot be treated as a deductible expense.
(3) the computation of taxable income is irrelevant.
(4) it is necessary to know what the amount of declared dividends will be.
1
The practice of recognizing expenses as they are incurred, rather than when they are paid for, is a characteristic of:
(1) the cost principle.
(2) the recognition principle.
(3) the matching principle.
(4) the conservation principle.
3
Which one of the following transactions does NOT affect the amount of owner(s) equity?
(1) investment by the owner(s)
(2) personal withdrawals from the business
(3) net incomes earned
4
Which one of the following best describes shareholders’ equity?
(1) share capital plus retained earnings
(2) retained earnings plus dividends
(3) share capital plus retained earnings plus dividends
(4) net income less dividends
1
ABC Inc. paid $155,000 for an asset on which the Income Tax Act allows capital cost allowance (CCA). The asset was purchased five years ago, and will be disposed at the end of this year. How much CCA will be claimed by ABC Inc. at the end of this year?
(1) $7,750
(2) $5,997
(3) $0
(4) Not enough information is given
3
Which one of the following is not a depreciable asset?
(1) a septic tank system
(2) 50 acres of fallow land
(3) carpeting
(4) a concrete patio
2
In a limited partnership:
(1) each limited partner is personally liable for all debts that the partnership incurs.
(2) a limited partner can actively be engaged in managing the business without any consequences to his or her partnership status.
(3) the income is taxed before it is distributed to the partners.
(4) there must be one or more general partners.
4
Which of the following is NOT a characteristic of a corporation?
(1) A corporation can be sued.
(2) The shareholders of a corporation cannot be held responsible for more than their agreed share purchase.
(3) The shares of a corporation must be held by more than one party.
(4) A corporation is a taxable entity.
3
The shareholder of a corporation may:
(1) terminate the existence of the corporation by selling her shares.
(2) vote to elect the board of directors of the corporation.
(3) receive taxable dividend payments.
(4) (2) and (3) but not (1).
4
Consider an asset with a purchase price of $185,000, economic life of 9 years, and $5,000 salvage value.
If you purchase the asset today, what will be its book value in three years?
(1) $125,000
(2) $150,000
(3) $175,000
(4) $190,000
1
