QUESTION 20 Ken Can Co. has the following tax information for this year: Pretax
ID: 2743831 • Letter: Q
Question
QUESTION 20
Ken Can Co. has the following tax information for this year:
Pretax income $72,000
Taxes payable $12,000
Income tax expense $19,000
Income tax paid $11,000
The reported effective tax rate is:
16.7%
57.9%
15.3%
26.4%
1 points
QUESTION 21
Given the information from 20 above, what is the income tax paid rate for Ken Can?
57.9%
16.7%
15.3%
26.4%
1 points
QUESTION 22
Fly by Night Airways purchase or leases its entire aircraft fleet. Since Fly by Night already has too much debt, they would prefer off-balance-sheet financing, which can be achieved using:
Capital leases
Stock options
Using convertible bonds to buy all aircraft rather than leasing
Operating leases
1 points
QUESTION 23
Arrow Co. has a net income (after tax) of $1.5 million, a holding gain on marketable securities classified as held-to-maturity of $40,000, a foreign currency translation loss of (all-current method) of $90,000, and an income tax expense of $230,000. Arrow will report a comprehensive income of:
$1,410,000
$1,450,000
$1,500,000
$1,220,000
1 points
QUESTION 24
A major reason Enron used special purpose entities was:
To increase pension plan funding levels
To increase equity dilution
Off-balance-sheet reporting
To increase working capital
1 points
QUESTION 25
General Motors (Finance) had the following debt marketable securities for 2001 (in $ millions): trading securities=5,195; available-for-sale=5,195; held-to-maturity=371. Which of these are recorded at fair value.
Held-to-maturity & trading securities
Held-to-maturity & available-for-sale
Trading securities
Trading securities & available-for-sale
1 points
QUESTION 26
Which of the following statements is correct:
Capital leases are off-balance-sheet & recorded as a periodic rental expense
A special purpose entity is used only to record marketable securities
Intraperiod tax allocation is associated with non-recurring items reported net of tax
Leases are never used by airlines & department stores
1 points
QUESTION 27
GM has the following information on property, plant & equipment for 2001 (in $ millions): ending gross investment=59,748; accumulated depreciation=33,404; depreciation expense=7,051. The average age of GM's fixed assets was:
21.1 years
8.5 years
55.9 years
4.7 years
1 points
QUESTION 28
Given the information from Question 27, GM had an average depreciable life of:
55.9 years
4.7 years
8.5 years
21.1 years
1 points
QUESTION 29
GM has the following tax-related information (in $ millions): taxes payable=1,372; income tax expense=768; income before tax=1,518; net income=601. GM's effective tax rate was:
56.0%
50.6%
43.8%
39.6%
1 points
QUESTION 30
ABC uses the last-in first-out inventory method during a period of rising prices. This suggests that:
Cost of goods sold would be lower & net income higher than using FIFO
Cost of goods sold would be higher & income tax lower than using FIFO
They don't use lower-of-cost-or market
Revenues & net income would be higher than using FIFO
a.16.7%
b.57.9%
c.15.3%
d.26.4%
Explanation / Answer
20.Answer D
Effective Tax rate= Tax expense/Pre tax income
=19000/72000
=0.2638888
=26.4%