Strategic Tax Mgt review PDF

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STRATA TOPIC 1 QUIZ I.Multiple Choice 1. What involves using tax-saver instruments with a specific purpose in mind? - Purposive Tax Planning 2. How long is long-term tax planning? -more than 12 months 3. What are the three types of tax planning? - periodic, permissive, and purposive 4. What are some provisions of tax planning in India? - deductions, exemptions, contributions, and incentives 5. Purposive Tax Planning ensures that you obtain what from your investments? - optimal benefits 6. This method involves planning under various provisions of the Indian taxation laws. - Permissive Tax Planning 7. Can either be Short-term tax planning or Long-term tax planning. -Periodic Planning 8. To the extent to which an individual or organizations suffers from the imposition of tax. - Incidence of tax 9. Incidence of tax is also known as - Burden of taxation 10. Tax planning refers to -Financial planning II. Enumeration 1. It is a focal part of financial planning -Tax planning 2-3. What is the primary context of tax planning? (2 points) -Save money -mitigate one's tax burden 4-7. What are the 4 advantages of tax planning ( 4 points) - to minimize litigation - to reduce tax liabilities - to ensure economic stability - to leverage productivity

8-10. What are the three ways you can avail to reduce tax liability? (3points) - tax concessions - exemptions - relief 11. T/F Tax forms as a part of the cost of production. True 12. Which significance of tax planning talks about the utilizing money saved as a way to cultivate a current business for future expansion and growth? - investment 13. The use of legal methods to minimize the amount of income tax owed by an individual or a business. - tax avoidance 14. All funds earned through illegal activity and otherwise legal income that is not recorded for tax purposes. - black money 15.) An Activity that is taking unfair advantage of the loopholes in Tax rules to reduce tax Liability. - tax avoidance 16-20.) In the example of Tax Avoidance give 5 ALLOWABLE DEDUCTIONS. (Amortization, commission, depreciation, losses, miscellaneous, office supplies) 21. An Illegal means to avoid paying taxes. - Tax evasion 22-25.) Give 4 examples of TAX Evasion (bogus expense , underreporting of income , inflating deductions without proof , hiding or not reporting cash transactions , hiding money in offshore accounts) 26-33.) Give 5 out of the Eight Tax Planning strategies. * maximize allowable deductions * Take advantage of available tax credits * Know your donees * Decide which method of deduction is advantageous, Optional standard deduction or itemized deduction * Decide which option to take with regard to excess tax payment

* Avoid taxing the non-taxable income * Monitor unappropriated retained earnings in relation to your paid-up capitalization to avoid penalties * Avail tax treaty relief of transactions involving residents of tax treaty countries

34. Refers to the management of finances, for the purpose of paying tax. - Tax Management 35. It refers to the compliance with the provisions of Income Tax Law and its allied rules. - Objective of tax management 36-39. Four (4) Elements of Tax Management - reduced adjusted gross income - increase the amount of tax deductions - appropriate use of tax credits - tax planning for retirement plans 40. Is defined as a person who pays tax or any sum of money under the provisions of the Income Tax Act, 1961. - Assessee STRATA TOPIC 2 QUIZ

1. An essential ingredient of capital budgeting decisions .(Present Value of the cash operating advantage) 2. When should capital budgeting decisions be made in order for it to be correct? (after tax basis) 3. Is a measure of financial performance that shows a company's ability to generate cash flow through its operations. (Cash Flow After Taxes) 4. It affect all facets of decision making. (Income Taxes) 5. An expense that act as a tax shield. (Depreciation)

6. Also known as after-tax cash flow. (Cash Flow After Taxes). 7. What must be added back to net income to arrive at the cash inflow because it is not a cash outflow? (Depreciation) 8. Represents a reduction in income taxes which occurs when lost allow an expense as a deduction from taxable income. (Taxshield) 9. It is the process of making investment decisions in long term assets (Capital Budgeting) 10. What is the formula in calculating CFAT. (CFAT = net income + depreciation + amortization + other non-cash charges) TRUE OR FALSE (2 pts. each) (T)1.Depreciation must be added back to net income to arrive at the cash inflow because it is not a cash flow but is deductible on the firm's income tax return. (F) 2. The calculation of the tax shield is similar to that for depreciation, except the book value of the old equipment must be increase by the expected sales proceeds. (T) 3. Like the depreciation tax shield, the choice of depreciation method, when a choice is available, may also alter a capital-budgeting decision. (T) 4. Although depreciation isn't a relevant cost for capital-budgeting decisions, it is deductible for income tax purposes and thus has an effect on the amount of income. (F) 5. The most common tax shields are depreciation and losses on the disposal of liabilities. (F) 6. Income taxes affect all facets decision making, and the failure to consider them may lead to correct decisions. (T) 7. For a capital-budgeting decision to be correct, it must be made on an after-tax basis. (T) 8. The higher the CFAT, the better-positioned a business is to make distributions. (T) 9. CFAT is also known as after-tax cash flow. (T) 10. CFAT is important for investors and analysts because it gauges a corporation's ability to meet its cash obligations such as an increase in working capital and payroll to support growth, make cash investments in fixed assets, or eventually and in the long run, make cash dividends or distributions.

FILL IN THE BLANKS 1. CFAT is calculated by adding back non-cash charges such as amortization, depreciation, restructuring costs, and impairment to _______. (net income) 2. An essential ingredient of capital budgeting decisions is the _______ of the cash operating advantage. (present value) 3. present value of cash flow after taxes can be calculated to ____ whether or not an investment in abusiness is worthwhile. (decide) 4. Like the depreciation tax shield, the choice of depreciation method, when a choice is available, may also alter a _______. (CAPITAL BUDGETING DECISION) 5. The taxpayers must now use either the MACRS or ________ method in computing their taxes. ( STRAIGHT-LINE) STRATA TOPIC 3 QUIZ

True or False 1. MACRS is a depreciation method used for income tax purposes that classifies property into one of eight groupings by considering the property's actual useful life FALSE 2. Reduction in income taxes which occurs when tax laws allow an expense such as depreciation or interest is represented by tax shield. TRUE 3. The most common capital-budgeting decisions usually involve cost reduction decisions or profit expansion decisions. TRUE 4. MACRS requires all taxpayers to use different useful life for similar property. FALSE 5. Comparative Income Approach present values that are computed separately for each alternative. TRUE Identification

6. MACRS stands for MODIFIED ACCELERATED COST RECOVERY SYSTEM 7. What convention is property subjected when a taxpayer places more than 40% of a year's acquired property into service in the last three months of that tax year? MID-QUARTER CONVENTION 8. In this approach, present values are computed separately for each alternative. COMPARATIVE INCOME APPROACH 9. The value of a cash inflow or outflow after giving effect to income taxes.

10. Any deduction on a firm's income tax return that does not require an outlay of cash in that period. TAX SHIELD 11. A decision that includes purchasing new labor-saving equipment or replacing an existing machine with a newer and more efficient machine. COST REDUCTION DECISION 12. A decision which includes of either entering a new market or introducing a new product. PROFIT EXPANSION DECISION 13. The most common capital budgeting decisions usually involve cost-reduction decisions or profit-expansion decisions. AFTER-TAX CAPITAL BUDGETING 14. This occurs when total expenses are greater than total revenues under the tax reporting rules. TAX LOSS 15. If a taxable loss results from the sale, the income tax saved is a CASH INFLOW 16. If a taxable gain results from the old machine's sale, the income tax due is a CASH OUTFLOW 17. Also know as residual value SALVAGE VALUE 18. Purchasing new or replacing new equipment should be calculated on an AFTER TAX BASIS

19. A term that means the original cost of an asset minus accumulated depreciation BOOK VALUE 20. A tax imposed on individuals or entities in respect of the income or profits earned by them INCOME TAX 21. Present value of all cash inflows less cash outflow. NET PRESENT VALUE 22. How many steps needed to prepare a comparative income analysis? 5 STEPS 23. It is the step 5 analysis that is needed to prepare to reach an investment decision. PRESENT VALUE ANALYSIS 24. If the present value of purchasing the new machine is $217, 621 and the present value in purchasing the old machine is $201, 921, Which machine is favorable to replace? NEW MACHINE 25. Solve the difference in number 4 question $ 15, 700 26. What is the Second step in Differential analysis Methods? Convert the salvage value of new machine to an after-tax 27. Complete the formula: After-tax Cost= ______x(1-tax rate) COST 28. Refer to the data in Illustration 13-6, what is the amount of the Old machine in the Fifth Period 0/ZERO 29. It is the additional or extra cost incurred to produce an additional product? INCREMENTAL COST 30. If you produce 100 units of shoes, then decided to produce an additional 50 units within the production schedule, what is your incremental cost? The additional 50 items/pagustosila explain 31-35. What are the important components to prepare present value analysis? item, present value, present value factor, time period

36-38. Enumerate the three savings that uses an after-tax basis when preparing direct labor savings, variable overhead savings, machine overhaul savings 39-40. The _____ of the new machine is not adjusted for ____. purchase price, income taxes.

STRATA TOPIC 4 QUIZ IDENTIFICATION 1. _______is greater than or equal to variable cost to continue its operation. (REVENUE) 2._______ method does not include the fixed cost.(SHORT-RUN) 3._______method involves the fixed cost.(LONG-RUN) 4.If __ is greater than the revenue, the entity is to shut down.(VARIABLE COST) 5. According to the report, material cost and labor cost is a __.(VARIABLE COST) 6. ____ is the study or relevant cost that is associated with a decision among possible courses of action so that the most appropriate alternative may be selected. ( DIFFERENTIAL COST ANALYSIS ) 7. _________ are the forgone benefits from an alternative not selected. (OPPORTUNITY COST )8.____________This are fixed cost that can be directly traced to the segment ( DIRECT FIXED COST 9. ____________An income statement used in making a decision whether to continue or eliminate a product ( CONTRIBUTION MARGIN INCOME STATEMENT) 10.__________This are organization sustaining fixed cost that are allocated to the segment (COMMON FIXED COST) TRUE/FALSE 1. The entity will shut down if it covers the variable cost . (FALSE) 2.To continue its operation, the revenue of the entity should be greater than the cost. (TRUE) 3. Cost should be greater than the revenue to continue the operation of the entity. (FALSE) 4. Long-run and short-run are the rules to whether to shutdown or continue its entity.(TRUE) 5. Greater cost is greater profit. (FALSE) 6. Avoidable cost are not relevant in decision making (FALSE) 7. Relevant cost are not future cost (FALSE) 8. Not all future cost are relevant (TRUE) 9. Discontinuing a product does not have a adverse effect in other product (FALSE) 10.Eliminating a product line is a decision that should only be taken after careful consideration? (TRUE) Enter

1. It is added into production but is not part of a finished product. A. Rework B. Waste C. Scrap D. Input material 2. Is a profit killer. A.Make and Buy B. Scrap or Rework C. Eliminate Product Line D. Shutdown or Continue 3. Which of the following is not a cause of scrap and rework? A. Machine malfunction B. Human error C. Poor Quality Materials D. Improving Communication 4. Is performed on finished products or components that did not meet specifications and, as a result of the rework, they become acceptable finished goods or components. A. Rework B. Eliminate C. Continue D. Process 5. Scrap is a __________ that results from manufacturing product. It is added into production but is not part of a finished product. A. Waste materials B. Residual materials C. Product Materials D. Manufacturing materials

MULTIPLE CHOICE 1.C 2.B 3.D 4.A 5.B 6.A 7.B 8.A 9.C 10.A...