Test Bank all Chapters

Canadian Income Taxation (2022- 2023) 25e William Buckwold, Joan Kitunen, Matthew Roman (Test Bank all Chapters) (Answer at the end of each Chapters)

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Version 1 1 Chapter 1 1) 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

2) 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.

3) 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.

4) 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.

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Version 1 2 5) 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

6) Two investor corporations may not enter jointly into which of the following?

• Joint venture
• Partnership
• Separate corporation
• Proprietorship

7) 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.

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?

• 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%.

9) 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

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Version 1 3 10) 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.

11) 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.

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 after-tax cost of the raise to ABC Ltd.?

A) $1,350

B) $2,750

C) $2,858

D) $3,650

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?

A) $1,350

B) $2,250

C) $2,750

D) $5,000

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