Chapter 16 Corporate Operations

1. (LO
1) In general terms, identify the similarities and differences between the
corporate taxable income formula and the individual taxable income
formula.

2. (LO
1) Is a corporation’s choice of its tax year independent from its year-end
for financial accounting purposes?

3. (LO
1) Can taxable corporations use the cash method of accounting? Explain.

.

4. (LO
2) Briefly describe the process of computing a corporation’s taxable income
assuming the corporation must use GAAP to determine its book income. How might the process differ for corporations
not required to use GAAP for book purposes?

5. (LO
2) What role do a corporation’s audited financial statements play in
determining its taxable income?

6. (LO
2) What is the difference between favorable and unfavorable book-tax
differences?

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7. (LO
2) What is the difference between permanent and temporary book-tax
differences?

8. (LO
2) Why is it important to be able to determine whether a particular
book-tax difference is permanent or temporary?

9. (LO
2) Describe the relation between the book-tax differences associated with
depreciation expense and with gain or loss on disposition of depreciable
assets.

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10. (LO
2) When a corporation receives a dividend from another corporation does the
dividend generate a book-tax difference to the dividend-receiving corporation
(ignore the dividends received deduction)?
Explain.