31) An asset was purchased midway into the fiscal year for $844,200. It was used to by the company for 17 months before being sold for $870,000. If the CCA class rate is 25%, the CCA recaptured is $315,994 and the Company’s tax rate is 40%, how much corporate income tax will the company pay? A) $10,320 B) $126,000 C) $131,557 D) $136,320 E) $139,290 32) Marcus Lalonde received $1,835.00 in cash dividends from Canadian corporations whose shares are in his personal portfolio. Marcus faces a problem of double taxation because A) The tax rate on passive income such as dividends is twice as high as on income from employment. B) He is liable for income taxes on these dividends. However, the cash represents income from corporations which have already paid income tax on those earnings C) He is liable for the income tax on these dividends and may be liable for capital gains tax upon sale of the shares that produced the dividends D) The tax treatment on dividends is similar to withdrawals from RRSP’s. A portion of the dividend is withheld by Revenue Canada upon the issue of the dividends and the portion that is taken into income is taxed E) He will be taxed on the dividends taken into income this year and will be taxed for the total amount of dividends he has received while holding the shares upon the sale of shares 33) Long Ltd. received cash from various activities as follows: $50,000 from interest earned on bonds it had purchased from IBM; $200,000 from a sale of inventory to GM; and $1,000,000 from a sale of its own shares to Manulife. How would these items appear on the cash flow statement? A) Operating activities $50,000; investing activities $200,000; financing activities $1,000,000. B) Operating activities $200,000; investing activities $1,000,000; financing activities $50,000. C) Operating activities $1,000,000; investing activities $50,000; financing activities $200,000. D) Operating activities $(50,000); investing activities $(200,000); financing activities $(1,000,000). E) Operating activities $200,000; investing activities $0; financing activities $1,050,000. 34) Short Ltd. received cash of $400,000 from a sale to Toronto Glass and $450,000 from a sale of a used machine to Oshawa Fibres. Short Ltd. paid $35,000 interest on bonds it had sold to Bankers’ Trust. How would these items appear on the cash flow statement? A) Operating activities $400,000; investing activities $450,000; financing activities $35,000. B) Operating activities $450,000; investing activities $35,000; financing activities $400,000. C) Operating activities $35,000; investing activities $400,000; financing activities $450,000. D) Operating activities $400,000; investing activities $450,000; financing activities $(35,000). E) Operating activities $(400,000); investing activities $(450,000); financing activities $(35,000). 35) Midday Ltd. received cash of $4,000 from a sale to Sirius Ltd., $50,000 from a sale of a used machine to Foolish Inc., and $70,000 dividends on shares it owns in of Gong Ltd. How would these items appear on the cash flow statement? A) Operating activities $4,000; investing activities $50,000; financing activities $70,000. B) Operating activities $70,000; investing activities $4,000; financing activities $50,000. C) Operating activities $50,000; investing activities $70,000; financing activities $4,000. D) Operating activities $(4,000); investing activities $(50,000); financing activities $(70,000). E) Operating activities $(70,000); investing activities $(4,000); financing activities $(50,000). 36) Allison Controls Ltd. follows a policy of paying cash for everything it buys. At the end of 2011 Allison had a balance in its machine account of $90,000 and the associated accumulated depreciation account of $45,000. Similar amounts at the end of 2010 were $100,000 and $50,000 respectively. During 2011 Allison sold a machine for $10,000. It had cost $25,000 and had accumulated depreciation of $10,000 at the time of the sale. How would these amounts appear on the cash flow statement? A) Operating activities $(5,000); investing activities $(10,000); financing activities $15,000. B) Operating activities $0; investing activities $(5,000); financing activities $0. C) Operating activities $25,000; investing activities $35,000; financing activities $90,000. D) Operating activities $0; investing activities $0; financing activities $15,000. E) Operating activities $5,000; investing activities $0; financing activities $0. 37) Allison Controls Ltd. follows a policy of paying cash for everything it buys. At the end of 2011 Allison had a balance in its machine account of $90,000 and the associated accumulated depreciation account of $45,000. Similar amounts at the end of 2010 were $100,000 and $50,000 respectively. During 2011 Allison sold a machine for $10,000. It had cost $25,000 and had accumulated depreciation of $10,000 at the time of the sale. How would these amounts appear on the income and cash flow statements? A) A loss of $5,000 on the income statement and a net cash outflow of $5,000 on the cash flow statement. B) A loss of $10,000 on the income statement and a net cash outflow of $15,000 on the cash flow statement. C) A loss of $15,000 on the income statement and a net cash outflow of $25,000 on the cash flow statement. D) A loss of $20,000 on the income statement and a net cash outflow of $10,000 on the cash flow statement. E) A loss of $30,000 on the income statement and a net cash outflow of $20,000 on the cash flow statement. 38) Which part(s) of the cash flow statement does the direct method cash flow statement alter? A) Operating activities. B) Investing activities. C) Financing activities. D) Operating and investing activities. E) Investing and financing activities. 39) In the direct cash flow method, which part of the cash flow statement do heating expenses paid affect? A) Operating activities cash inflows. B) Operating activities cash outflows. C) Investing activities cash inflows. D) Investing activities cash outflows. E) Financing activities cash inflows. 40) Which of the following statements best describes the purpose of the dividend tax credit? A) The dividend tax credit attempts to counteract other tax breaks enjoyed by investors. B) The dividend tax credit attempts to provide more revenue for cash-strapped governments. C) The dividend tax credit attempts to entice more corporations to list their shares on the TSX. D) The dividend tax credit attempts to counteract double taxation on investors. E) The dividend tax credit attempts to counteract the non-deductibility of dividends for corporations. 41) The current assets of KLM Inc. totalled $145,000 while its current liabilities were $200,000. Which of the following best describes KLM’s situation? A) KLM’s cash sales were too low during the current year. B) KLM’s spending was too high during the current period. C) KLM’s financial viability is at risk for the current period. D) KLM’s inventory was too high during the current period. E) KLM’s accrued wages were too high during the current period. 42) Which of the following represents the best description of accumulated depreciation? A) Accumulated depreciation is a non-cash expenditure on the cash flow statement. B) Accumulated depreciation is a contra asset on the balance sheet. C) Accumulated depreciation is an expense on the income statement. D) Accumulated depreciation is an allocation of costs over the life of the asset.