FINAL SPEA-V 186
A firm buys $1,000 in inputs from other firms, pays $1,000 for labor services, and has final retail sales of $2,500 for a profit of $500. Suppose the value added tax rate is 10%, what is the firm's value added tax liability?
ANSWER 150
Which is the most effective means of providing property tax relief? Limiting property tax rate. Limiting property tax assess value Correct! Limiting property tax levy Income tax deduction
ANSWER LIMITING PROPERTY TAX LEVY
Mr. Smith faces a federal marginal tax rate of 28 percent. His adjusted gross income in 1992 was $37,500. Which of the following statements is most likely to be correct, based on the information you have here? -Mr. Smith paid $10,500 federal income tax for 1991 -Mr. Smith paid tax of an amount that cannot be computed from the data provided, but it must have been less than $10,500. -Mr. Smith paid an effective tax rate of 28 percent. - None of the above.
ANSWER Mr. Smith paid tax of an amount that cannot be computed from the data provided, but it must have been less than $10,500.
Suppose Mary sells a computer to Tom for $1000. Tom takes possession of the computer on May 1st and promises to pay on June 1st. Can Mary record this as revenue on May 1st under cash accounting basis? Yes No
ANSWER NO
The Federal government follows accounting standards set by FASAB. Which federal agencies are primarily responsible for the formation of FASAB?
ANSWER OMB, GAO and Treasury
In Europe, the sales tax that yields more revenue than any other is the: -Retail Sales Tax -Value Added Tax (VAT) -Excise Tax -Luxury Tax
ANSWER Value Added Tax (VAT)
Circuit breakers may be generally preferable to exemptions as a means of property tax relief because: -they place costs directly on local governments. -they require annual reauthorization and thus allow greater control. - they are targeted. -they link property and sales taxes.
ANSWER they are targeted.
Hicksville has a proposed budget of $7,000,000 for the fiscal year. The city has an assessed value of $100,000,000 and will receive state aid of $100 per capita based on its 2000 census population of 15,000. What is the nominal tax rate in Hicksville?
ANSWER .055
The individual income tax became a permanent feature (at least so far) of the federal tax structure in: -789, with the new Constitution. -1861, with the Civil War. -1913, just before WWI. -1940, just before U.S. participation in WWII.
ANSWER 1913, just before WWI.
A residence in Sullivan County has gross assessed value of $15,000. Its owner qualifies for an old age exemption of $1,000 and a homestead exemption of $2,000. The property tax rate is $5.00 per $100 of assessed value. What will the property tax bill equal on this property?
ANSWER 600
A state applies a 7 percent sales tax to consumer purchases of many items. These are data for a typical family: Annual Income $60,000 Family Size 2 Purchases of taxed items $30,000 What statutory rate does the family pay?
ANSWER 7%
Which of the following statements is correct? -A taxpayer may legally avoid paying federal income tax by receiving income in kind, not in cash. -A taxpayer may legally avoid paying federal income tax by working for a non-profit organization. -A taxpayer may legally avoid paying federal income tax by collecting income only from non-labor sources (stock dividends, bank interest, etc.) - A taxpayer may legally avoid paying federal income tax by investing in municipal bonds
ANSWER A taxpayer may legally avoid paying federal income tax by investing in municipal bonds
Which of the following statements about American state sales taxes is generally true? -The statutory rates of American sales taxes are lower than of European value added taxes -American sales taxes usually apply generally to tangible personal property transactions but only selectively to purchases of services. -American retail sales taxes often include many purchases made by businesses as well as household consumption purchases. - All of the above
ANSWER ALL OF THE ABOVE
Suppose I want to know if a firm is financially viable. Which of the following documents should I focus on? -balance sheet - cashflow statement -Activity statement -none of the above
ANSWER CASHFLOW STATMENT
Which fo the following standards setting boards is responsible for the GAAP that governs accounting by state and local governments in the US? FASB GASB FASAB IFSR
ANSWER GASB
Under the current federal individual income tax law, which of the following would be an exclusion? -Wages paid by a non-profit organization, like the Red Cross. -Interest paid on a bond issued by a state government before 1986. -The value of an old car you received in exchange for painting a house. -All the above are exclusions.
ANSWER Interest paid on a bond issued by a state government before 1986.
An organization repays a loan of $400. What effect would this have on the organization's liabilities? -Increase liabilities - Reduce liabilities -No effect on liabilities -none of the above.
ANSWER REDUCE LIABILITIES
Multistage sales taxes levied at a fixed rate on the gross receipts of transactions at each stage of production are called: -excise taxes. - turnover taxes. -value-added taxes. -general consumption taxes.
ANSWER TURNOVER TAXES
Indexation of individual income taxes is designed to prevent: - bracket creep. -the Laffer affect. -horizontal inequities. -regressivity.
ANSWER bracket creep.
Use of modified accrual accounting: -eliminates the need for keeping track of encumbrances during budget execution. -records expenditures when contractual payments are made. - records expenditures when materials are delivered. -requires immediate depreciation of all capital assets.
ANSWER records expenditures when materials are delivered.
The US federal debt reflects: Annual differences between revenue and expenditure. The Federal Reserve's open market operations. Changes in federal trust fund balances All of the above.
ANSWER ALL OF THE ABOVE
The largest single source of tax revenue to local governments is: -the payroll tax - the real property tax -the retail sales tax -the individual income tax
ANSWER: the real property tax
IS THE FOLLOWING STATEMENT TRUE OR FALSE? When writing tax policy, the government is able to specify the remittance incidence, but not the statutory incidence.
FALSE
Fractional assessment refers to: -the practice states use to divide formula funding among cities. -the balance of corporate profits across state jurisdictions. - assessing properties at less than market value for tax purposes. -None of the above.
assessing properties at less than market value for tax purposes.
A firm buys $1,000 in inputs from other firms, pays $1,000 for labor services, and has final retail sales of $2,500 for a profit of $500. Suppose the retail sales tax rate is 10%, what is the firm's retail sales tax liability?
$250
A firm buys $1,000 in inputs from other firms, pays $1,000 for labor services, and has sales of $2,500 for a profit of $500. Under a value added tax, the firm's tax base would be: -500 -1,500 -2,500 -None of the above
ANSWER 1500
A firm has total assets of $500 and liabilities of $300. What is the firm's net assets?
ANSWER 200
What fraction of the 2018 treasury debt was foreign-owned?
ANSWER 40%
In the logic of consumption taxation, business purchases are exempt in retail sales taxation. Which of the following is a reason for that exemption? -Taxes should normally avoid distorting business decisions. -The tax is designed to place a uniform rate on household consumption expenditures. -Taxes ought not discourage economic development. - All of the above are reasons for exemption.
ANSWER ALL OF THE ABOVE
An organization takes a loan of $400 from a bank and use this money to buy an equipment that has a market value of $400. This transaction would increase the organization's net assets? TRUE FALSE
ANSWER FALSE
The federal government taxes consumption mainly through: -a retail sales tax =value-added tax - selective excise taxes -None of the above
ANSWER selective excise taxes
The marginal tax rate equals: -tax paid divided by the appropriate measure of affluence. -the tax liability resulting from true application of the tax statutes divided by the statutory base. -the tax rate required, at the margin, to balance the budget. - the amount by which a taxpayer's tax would increase from an additional dollar of the tax base.
ANSWER the amount by which a taxpayer's tax would increase from an additional dollar of the tax base.
Which of the following constitutes a property tax relief measure? -Circut breakers -deferrals -exemptions - all of the above
ANSWER ALL OF THE ABOVE
Deficits arise when revenues exceed expenditures. True False
ANSWER FALSE
Gen X Outfitters has offices, warehouses, and outlet stores in Wisconsin and Illinois. It makes catalog sales, using the mail, telephones, and the Internet for ordering and using mail for delivery. It makes regular sales to customers who shop in its outlet stores. You live in Indiana. Which of the following is accurate? - On a visit with friends at Northwestern University (located in IL), you buy a jacket at the Evanston (Illinois) outlet store and take it home to Indiana. You must pay Illinois sales tax, even though you take the jacket with you. -On a visit with friends at NorthwesternUniversity (located in IL), you buy a jacket at the Evanston (Illinois) outlet store and take it home to Indiana. You do not pay the Illinois sales tax and, because the transaction crosses state lines, you owe no Indiana use tax either. -On a visit with friends at NorthwesternUniversity (located in IL), you buy a jacket at the Evanston (Illinois) outlet store and take it home to Indiana. You do not pay the Illinois sales tax, but you do owe the Indiana sales tax on your return. -None of the above.
ANSWER On a visit with friends at Northwestern University (located in IL), you buy a jacket at the Evanston (Illinois) outlet store and take it home to Indiana. You must pay Illinois sales tax, even though you take the jacket with you.
Governments in the United States use a broad portfolio of taxes. Not all levels use the same taxes to the same degree. Which of the following statements is not correct? -At least some local governments in every state levy a property tax. -Most, but not all, states levy a sales tax on all retail purchases or -sales of tangible personal property, except transactions specifically exempt. -The doctrine of pre-emption dictates that, if the federal government taxes a particular commodity, states are not permitted to tax the commodity without specific federal authorization -Most, but not all, states levy both individual and corporate income taxes.
ANSWER The doctrine of pre-emption dictates that, if the federal government taxes a particular commodity, states are not permitted to tax the commodity without specific federal authorization
The marginal tax rate equals: -tax paid divided by the appropriate measure of affluence. -the tax liability resulting from true application of the tax statutes divided by the statutory base. -the tax rate required, at the margin, to balance the budget. - the amount by which a taxpayer's tax liability would increase from a one dollar increase in taxable income.
ANSWER the amount by which a taxpayer's tax liability would increase from a one dollar increase in taxable income.
he federal government may levy an individual income tax without the need to apportion among states because: -the U.S. Supreme Court has ruled that the individual income tax is not a direct tax. -individual income taxes are subject only to the requirement that they be uniform across states. - the sixteenth amendment allows such taxes without apportionment. -None of the above.
ANSWER the sixteenth amendment allows such taxes without apportionment.
Which of the following is not an advantage of income taxation? - Income taxation remains constant when the economy contracts. -Income taxes yield substantial amount of revenue. -Income taxation entails low collection costs. -Income is a reasonable measure of individual capacity to bear the cost of government.
ANSWER: Income taxation remains constant when the economy contracts.
Which of the following statements is not accurate? -Five states do not have a general sales tax. -Not all states have individual income taxes. -Not all states have corporate income taxes. - None of the above—all are accurate.
ANSWER: None of the above—all are accurate.
States apply high excise tax rates on cigarettes. Which of the following is an accurate statement about such taxes? - The taxes yield some revenue, but the amounts are small in relation to general sales and individual income taxes. -The taxes force highly profitable tobacco companies to bear their fair share of the costs of state government. -Because cigarette purchases are made from discretionary income, the taxes distribute the cost of state government in a progressive fashion. -None of the above.
ANSWER: The taxes yield some revenue, but the amounts are small in relation to general sales and individual income taxes.
Which of the following statements about federal government finances is not correct? -The federal government levies no general sales tax. -The federal government levies three general types of income taxes. - The corporate income tax is currently the second largest source of total revenue for the federal government. - None of the above.
ANSWER: The corporate income tax is currently the second largest source of total revenue for the federal government.
Which of the following statements is correct? -The federal government in the United States relies heavily (more than 30 percent of revenue) on intergovernmental revenue. -The federal government in the United States levies no general sales tax. -The federal government in the United States collects less money than do state governments from custom duties. -The corporate income tax is the second-largest source of total revenue for the federal government.
ANSWER: The federal government in the United States levies no general sales tax.
Why is the retail sales tax inherently regressive?
Retail sales tax is inherently regressive because the "rich" only consume a lower share of income unlike the poor. Retail sales tax also has a linear tax rate. Therefore, both of these things together mean that the average tax rate decreases as income increases... making it regressive.
State and local debt is used primarily to pay for long-term investments.
TRUE
A taxpayer finds that his average tax rate (defined as tax liability divided by taxable income) is 10% while his average effective tax rate (defined as tax liability divided by total income) is 5%. What are the possible explanations for the difference between these two rates?
The explanation for the difference between the average tax rate and the average effective tax rate is that the average tax rate takes into account exclusions, deductions, and tax credits and calculates the amount of a household's tax burden and therefore how it affects the household's ability to consume. The average effective tax rate takes into account your total income and not all of the exclusions, deductions, and credits. The average effective tax rate is smaller due to this and it is the actual percentage you owe to the IRS.
