Question

12.) The most common term for a consumption tax is:

		wealth tax.
		progressive tax.
		sales tax.
		income tax.

QUESTION 13

1. Which of the following is a consumption tax?

   		Ad valorem tax
   		Real estate tax
   		Excise tax
   		Personal property tax

QUESTION 14

1. In order to compare the yields on municipal and corporate bonds the investor must restate the yield of either the taxable corporate bond to an after tax basis or the municipal bond to a pretax equivalent because:

   		corporate bonds are tax free.
   		municipal bonds are tax free and investors must compare rates on an equal basis.
   		a municipal bond is typically safer than a taxable corporate bond.
   		such restatements are not necessary for most taxpayers.

QUESTION 15

1. Selected accounts are listed below. What is the tax rate?
   (Round to the nearest whole percentage)
   Accounts Payable	$2,000
   Sales	55,000
   Cost of goods sold	26,000
   Interest expense	2,000
   Marketing expense	8,000
   Admin Expense	2,000
   Taxes	4,560

   		27%
   		29%
   		30%
   		34%

QUESTION 16

1. The repayment of debt is:

   		an operating activity.
   		an investing activity no matter how the money from the loan was allocated.
   		a financing activity.
   		an investing activity assuming the debt was used for the purchase of a fixed asset.

QUESTION 17

1. Common size income statements divide each account by:

   		revenues.
   		total assets.
   		net income.
   		None of the above

QUESTION 18

1. A use of cash would be generated by which of the following?

   		An increase in accounts receivable
   		A decrease in inventory
   		An increase in accounts payable
   		An increase in accrued expenses

Answer 1

1. Option (c) is correct

Consumption tax is a tax on consumed goods and services.An example of consumption tax is sales tax because sales tax is based on the goods or services sold, which are later consumed by the purchaser.

2. Option (c) is correct

Consumption tax is a tax on consumed goods and services. Excise tax is also and example of consumption tax because excise tax is tax on the goods or services manufactured, which are later consumed by the purchaser.

3. Option (b) is correct

4. Option (a) is correct

Income tax is a tax on income. So, first we will calculate the income before tax as per below:

Sales $55000

Less: Cost of the goods sold ($26000)

Gross Margin $29000

Less: Interest expense ($2000)

Less: Marketing expense ($8000)

Less: Admin expense ($2000)

Income before tax $17000

Now,

Income before tax = $17000

Income tax = $4560

Income tax = Income before tax * Tax rate

Tax rate = Income tax / Income before tax * 100

Tax rate = $4560 / $17000 * 100 = 26.82 or 27%

5. Option (c) is correct

Repayment of debt is a financing activity.

6. Option (a) is correct

Common-size income statement analysis puts every line item on the income statement as a percentage of sales or revenue.

7. Option (a) is correct

An increase in accounts receivable is a use of cash.

The rule is:

An increase in current assets will reduce cash, so we will deduct it and a decrease in current assets will increase cash, so we will add it. Similarly, an increase in current liabilities will increase cash, so it will be added and a decrease in current liabilities will reduce cash, so it will be deducted.

Accounts receivable is a current asset So an increase in accounts receivable is a use of cash.