Accounting Solutions Essay

1. Which of these is not considered an advantage of the corporate business form?
a. A shareholder-employee’s salary is fully deductible from corporate income.
b. Shareholders are not taxed on corporate income until it is distributed to them.
c. Shareholder-employees can participate in employee fringe benefits
d. Corporate shareholders cannot deduct corporate losses from their income.
Answer: d 2. Corporation AB had a net long-term capital loss is 2005 and net operating loss in 2004. What are the earliest year(s) to which these losses can be carried?
Answer: Capital loss to 2003 or 2010 and net operating loss to 2002 or 2024 3. Cloud corporation has a taxable income of $100,000 in 2005 along with a $30,000 general business credit. What is the amount of its credit carryover and the last year to which the carryover could be used?
Answer: $7,750 carried over to 2004 or 2025 4. Margolin Corporation has a regular taxable income of $120,000. It has a positive adjustment of $90,000, preference items of $50,000 and negative adjustments of $40,000. What is its alternative minimum tax?
Answer: $9,450 5. The Shepherd Corporation has $40,000 of taxable income, $200,000 of positive adjustments, and a $10,000 preference item. What is its alternative minimum taxable income?
Answer: $235,000 6. Corporation P owns 85 percent of Corporation S1; Corporation S1 owns 60 percent of Corporation S2; Corporation S2 owns 90 percent of S3; Corporation S3 owns 60 percent of Corporation S4 and 15 percent of Corporation S2; Corporation S4 owns 100 percent of Corporation S5. Identify the consolidated group of corporations.
Answer: P, S1, S2, S3, S4, S5 7. Corporation P files a consolidated return with Corporation S. In preparing a consolidated return, their accountant finds the following: Separate taxable income (loss) P= $500,000 S= ($200,000) Capital gain (loss)