Question 6: Which statement is correct with respect to Section 1014 of the Internal Revenue Code?

A. Section 1014 requires adjustment, after the death of the decedent, to the basis of most items included in a decedent’s gross estate.

B. Section 1014 permits the exclusion from a decedent’s gross estate of real property located in a foreign country.

C. Section 1014 provides mortgage foreclosure relief for real property comprising part of a decedent’s gross estate.

D. Section 1014 was repealed effective January 1, 2015.

Question 7: The decedent died on March 12, 2016. The longest first income tax year the decedent’s executor can choose for the estate will end on

A. December 31, 2016.

B. January 31, 2017.

C. February 28, 2017.

D. March 31, 2017.

Question8: Which of the following trusts is eligible to be an S corporation shareholder?

A. Only electing small business trusts.

B. Only eligible foreign trusts.

C. Only qualified subchapter S trust.

D. Only electing small business trusts and qualified subchapter S trusts.

E. All of the above trusts are eligible to be S corporation shareholders.

Question 9. S corporation borrows $5,000 from Bank at 6% interest for one year.

A. If Bill, one of several shareholders of S corporation, signs an agreement with Bank guaranteeing repayment of the loan, he may add $5,000 to the basis of his S stock.

B. If shareholder Bill signs a repayment guarantee he will be entitled to have his Schedule K-1 from S corporation list 100% of the loan interest paid as his deduction to the exclusion of the other shareholders.

C. Even if shareholder Bill signs a repayment guarantee he will not be permitted to increase his S corporation stock basis by $5,000.

D. Partnership and S corporation tax rules allowing partners/shareholders to increase the basis of partners/shareholders by the amount of partnership/corporation debt are identical.

Question 10. Which of the following statements is correct?

A. A husband and wife count as a single S corporation shareholder.

B. A spouse and that spouse’s estate count as a single S corporation shareholder.

C. Members of a family with a common ancestor (who meet the six generations test), provided the appropriate election is in effect.

D. All of the above are correct.

Question 11 . An S corporation’s shareholder’s adjusted basis in the shareholder’s stock is used to determine

A. the extent to which a distribution made by the corporation to the shareholder is taxable.

B. the amount of losses that shareholders may deduct in a given year.

C. the shareholder’s realized gain or loss upon the sale or exchange of the stock.

D. all of the above.

Question 12. Which of the following tax consequences is not determined by reference to a shareholder’s adjusted basis in the shareholder’s stock in an S corporation?

A. the extent to which a distribution made by the corporation to the shareholder is taxable

B. the amount of losses that the shareholder may deduct in a given year

C. the shareholder’s realized gain or loss upon the sale or exchange of the stock

D. the amount of distributions to which the shareholder is entitled in a given year

Consider a fishery characterized by the following total cost (TC) and total revenue (TR) curves as a function of total effort (E): TC = 12E and TR = 32E – E 2 , Differentiating these functions yields the marginal cost (MC) and marginal revenue (MR) curves: MC = 12 and MR = 32 – 2E.

a. Draw a graph depicting total costs and total revenues as a function of effort in the fishery. At what effort level are total revenues maximized? (5 points)

b. With open access to the fishery, what are the equilibrium levels of effort and total profit? (5 points)

c. What level of effort maximizes total profits in the fishery? What are total profits at this level of effort? (5 points)

The owner of Showtime Movie Theaters, Inc., would like to predict weekly gross revenue as a function of advertising expenditures. Historical data for a sample of eight weeks follow has been collected in the Microsoft Excel Online file below. Open the spreadsheet and perform the required analysis to answer the questions below.

Predicted Revenue

ANOVA

Use ?? = .01 to test the hypotheses for the model y = ??₀ + ??₁??₁ + ??₂??₂ + ??, where:

H₀: ??₁ = ??₂ = 0

H_a: ??₁ and/or ??₂ ?0

Compute the F test statistic (to 2 decimals).

31.98

What is the p-value?

Less than .01

What is your conclusion?

The overall model is significant.

Use ?? = .05 to test the significance of ??₁. Compute the t test statistic (to 2 decimals).

7.97

What is the p-value?

Less than .01

What is your conclusion?

Significant relationship between television advertising and revenue

Should x₁ be dropped from the model?

No, x1 should not be dropped from the model.

Use ?? = .05 to test the significance of ??₂. Compute the t test statistic (to 2 decimals).

3.57

What is the p-value?

Between .01 and .02

What is your conclusion?

Significant relationship between newspaper advertising and revenue

Should x₂ be dropped from the model?

No, x2 should not be dropped from the model

The owner plans to spend (in $1000s) $4.7 on television advertising and $3.6 on newspaper advertising. What is the expected revenue (in $1000s) for this advertising combination (to the nearest whole number)?

$????????????????

Thome and Crede, CPAs, are preparing their service revenue (sales) budget for the coming year (2020). The practice is divided into three departments: auditing, tax, and consulting. Billable hours for each department, by quarter, are provided below.

Average hourly billing rates are auditing $81, tax $93, and consulting $102.

Prepare the service revenue (sales) budget for 2020 by listing the departments and showing for each quarter and the year in total, billable hours, billable rate, and total revenue.

e) Suppose that the video streaming service is charging the price that maximizes its total revenue, but the city government imposes an excise tax on videos that results in the price of videos rising to $3.50. As a result, the demand for movies increases by 20 at each price.

g) Given the circumstances in (e), what is the cross elasticity of movies for videos? What does this say about the relationship between the two products? Round your answer to 2 decimal places.

Elasticity:    .

h) Referring to the original data in the table given below, assume now that the average weekly earnings of the townspeople rise from $700 to $800, with the result that the demand for movies increases by 10 percent. If the price being charged is $6, what is the income elasticity of demand? What does this suggest about the product, movies? Round your answer to 2 decimal places.

Elasticity:   .

The Chilean economy relies on copper mining (e.g. 20% of government revenue is related to copper mining) and other commodities (60% of exports). Make a (well supported) SWOT analysis of this industry in Chile.

The Internal Revenue Service sampled 20 tax returns and found that the average tax refund was $425.39 with a standard deviation of $107.10.

Construct a 99% confidence interval for the mean value of all tax refunds. Why do we have a use a t-confidence interval instead of a z-confidence interval for this problem?

If price exceeds the minimum of average total cost, then comparing marginal revenue to marginal cost
(x) tells a firm the total amount of profit that it will generate.
(y) indicates how much additional profit is generated by the last unit of production.
(z) tells a firm whether it should increase output, decrease output or remain at the present level of output.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (z) only

A profit maximizing firm in a competitive market produces widgets. Suppose the market price for widgets increases to $15. At the profit maximizing (loss minimizing) quantity of 25,000 widgets, the ATC is equal to $18 and the AFC is equal to $5. Given these conditions the
(x) firm will continue its production of widgets in the short run since it is producing at its profit maximizing (loss minimizing) quantity and price exceeds average variable cost at that quantity.
(y) firm will experience a loss of $75,000 since total revenue is $375,000 and total cost is $450,000.
(z) the firm will continue to produce 25,000 widgets since it would lose $125,000 if it shut down and did not produce any widgets.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

A profit maximizing firm in a competitive market produces T-shirts. Suppose the market price for T-shirts decreases to $8. At the profit maximizing (loss minimizing) quantity of 40,000 T-shirts, the AVC is equal to $6 and the AFC is equal to $2. Given these conditions the
(x) firm will experience zero economic profits since price is equal to average total cost.
(y) the firm will continue to produce 40,000 T-shirts in the short run since it would earn an accounting profit at that level of production.
(z) firm will exit in the long run because firms must receive more than zero economic profit in the long run in order to stay in business.
A. (x), (y) and (z)
B. (x) and (y) only
C. (x) and (z) only
D. (y) and (z) only
E. (x) only

At the current level of output, a profit-maximizing firm in a competitive market earns average revenue of $25, has an average total cost of $22 and an average variable cost of $17. If the firm's marginal cost curve is equal to its average total cost curve at an output level of 20,000 units, then the firm earns profit of $60,000 at its current level of output.

True

False

The short-run supply for a firm in a perfectly competitive market will not be influenced by the size of fixed costs if price is less than average total cost but more than average variable cost at the profit maximizing quantity.

True

False

For a firm in a perfectly competitive market the price of the good is always equal to marginal revenue, but less than average revenue and equilibrium market price

True

False