Test bank International Finance MCQ wordChap 21.docx
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Test bank International Finance MCQ wordChap 21.docx
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TestbankInternationalFinanceMCQwordChap21
FundamentalsofMultinationalFinance,3e(Moffett)
Chapter21
MultinationalTaxManagement
21.1
MultipleChoiceandTrue/FalseQuestions
1)
Theprimaryobjectiveofmultinationaltaxplanningistominimizethefirm'sworldwidetaxburden.
Answer:
TRUE
Topic:
TaxPlanningObjectives
Skill:
Recognition
2)
Theissueofethicsinthereportingofincomeandthepaymentoftaxesisaconsiderableone.TheauthorsstatethatmostMNEsoperatinginforeigncountriestendtofollowthegeneralprincipleof
A)
"wheninRome,doastheRomansdo."
B)
fulldisclosuretothetaxauthorities.
C)
maintainacompetitiveplayingfieldbycheatingasmuchasthelocalcompetition,nomore,noless.
D)
noneoftheabove.
Answer:
B
Topic:
TaxationEthics
Skill:
Conceptual
3)
WhichofthefollowingisanunlikelyobjectiveofU.S.governmentpolicyforthetaxationofforeignMNEs?
A)
toraiserevenues
B)
toprovideanincentiveforU.S.privateinvestmentindevelopingcountries
C)
toimprovetheU.S.balanceofpayments
D)
Alloftheaboveareobjectives.
Answer:
D
Topic:
TaxPolicyObjectives
Skill:
Recognition
4)
A________taxpolicyisonethathasnoimpactonprivatedecision-making,whilea________policyisdesignedtoencouragespecificbehavior.
A)
flat;taxincentive
B)
neutral;flat
C)
neutral;taxincentive
D)
noneoftheabove
Answer:
C
Topic:
TaxPolicy
Skill:
Conceptual
5)
WhichofthefollowingisNOTanexampleofataxincentivepolicy.
A)
ThefederalgovernmentgivesataxcredittoMNEsthatmakedomesticcapitalimprovementsbutnotforeigncapitalimprovements.
B)
Corporationsareallowedtotakeadirecttaxcreditforeachdollarofmatchingdonationstheymaketoinstitutionsofhighereducation.
C)
Ataxlawispassedthatmakesinterestonpropertynontax-deductible,butinterestpaymentsondurablegoodsare.
D)
Allareexamplesofataxincentivepolicy.
Answer:
D
Topic:
TaxIncentivePolicy
Skill:
Conceptual
6)
GeneralMotorsoperatesinmanydifferentcountriesandpaystaxesatmanydifferentrates.However,theyalwayspaythesamerateastheirlocalcompetitors.GeneralMotorsisoperatinginanenvironmentof________taxpolicy.
A)
domesticneutrality
B)
foreignneutrality
C)
territorialapproach
D)
noneoftheabove
Answer:
B
Topic:
ForeignNeutralityTaxPolicy
Skill:
Recognition
7)
TheUnitedStatestaxesthedomesticandremittedforeignearningsofU.S.basedMNEsnomatterwheretheearningsoccurred.Thisisanexampleofa________approachtolevyingtaxes.
A)
worldwide
B)
territorial
C)
neutral
D)
equitable
Answer:
A
Topic:
WorldwideTaxApproach
Skill:
Recognition
8)
TheUnitedStatestaxesallearningsonU.S.soilbybothdomesticandforeignfirms.Thisisanexampleofa________approachtolevyingtaxes.
A)
worldwide
B)
neutral
C)
territorial
D)
noneoftheabove
Answer:
C
Topic:
TerritorialTaxApproach
Skill:
Conceptual
9)
AcountryCANNOThavebothaterritorialandaworldwideapproachasanationaltaxpolicy.
Answer:
FALSE
Topic:
WorldwideandTerritorialTaxApproach
Skill:
Conceptual
10)
JensenOptimetricsInc.isbasedinacountrywithaterritorialapproachtotaxationbutgenerates100%ofitsincomeinacountrywithaworldwideapproachtotaxation.Thetaxrateinthecountryofincorporationis25%,andthetaxrateinthecountrywheretheyearntheirincomeis50%.Intheory,andbarringanyspecialprovisionsinthetaxcodesofeithercountry,Jensenshouldpaytaxesatarateof________.
A)
75%
B)
62.5%
C)
0%
D)
50%
Answer:
C
Topic:
WorldwideandTerritorialTaxApproach
Skill:
Analytical
11)
Theterritorialapproachtotaxationpolicyisalsotermedthe________approach.
A)
source
B)
ethical
C)
greedy
D)
location
Answer:
A
Topic:
TerritorialApproach
Skill:
Recognition
12)
Taxtreatiesgenerallyhavetheeffectofincreasingthewithholdingtaxesbetweenthecountriesthatarenegotiatingthetreaties.
Answer:
FALSE
Topic:
TaxTreaties
Skill:
Conceptual
13)
________taxesareappliedtoincomeand________taxesareappliedtosomeothermeasurableperformancecharacteristicofthefirm.
A)
Income;direct
B)
Indirect;income
C)
Indirect;direct
D)
Direct;indirect
Answer:
D
Topic:
IndirectandDirectTaxes
Skill:
Recognition
14)
Dependingonthehostcountry,corporateincometaxesworldwidemaybeaslowas________.
A)
0%
B)
5%
C)
10%
D)
15%
Answer:
A
Topic:
InternationalCorporateTaxRates
Skill:
Recognition
15)
Thebasicideabehindwithholdingtaxesforforeigninvestorsis
A)
toreceivetaxesonpassivelyearnedincome.
B)
arecognitionthatmostforeigninvestorsareunlikelytofiletaxesinthehostcountry.
C)
toensurethatincomeearnedistaxedbythehostcountry.
D)
alloftheabove.
Answer:
D
Topic:
ForeignWithholdingTaxes
Skill:
Conceptual
16)
Avalue-addedtaxhasgainedwidespreadusageinWesternEurope,Canada,andpartsofLatinAmerica.
Answer:
TRUE
Topic:
Value-addedTax
Skill:
Recognition
17)
Ataxthatiseffectivelyasalestaxateachstageofproductionisdefinedasa/an________tax.
A)
flat
B)
equitable
C)
value-addedtax
D)
noneoftheabove
Answer:
C
Topic:
Value-addedTax
Skill:
Recognition
18)
Whatisthetotalvalueoftaxespaidinthefollowingexampleifthevalueaddedtaxis10%?
Afarmerraiseswheatthathesellsfor$1.50tothegraincompany.Thegraincompanysellstotheprocessorfor$2.00perbushel.Theprocessorturnsthewheatintoabreakfastcerealandwholesalesitfor$3.00perbushel.Theretailersellsthecerealfor$4.00perbushel.
A)
$0.15
B)
$0.20
C)
$0.30
D)
$0.40
Answer:
D
Topic:
InternationalTaxation
Skill:
Analytical
19)
Ataxthatisaformofsocialredistributionofincomeisdefinedasa/an________tax.
A)
un-American
B)
transfer
C)
flat
D)
noneoftheabove
Answer:
B
Topic:
TransferTax
Skill:
Recognition
20)
A________isadirectreductionoftaxeswhereasa________reducesthetaxableincomebeforetaxes.
A)
foreigntaxcredit;domestictaxcredit
B)
taxdeduction;taxcredit
C)
taxcredit;taxdeduction
D)
noneoftheabove
Answer:
C
Topic:
TaxCreditsandTaxDeductions
Skill:
Recognition
21)
Taxcreditsarelessvaluableonadollar-for-dollarbasisthanaretax-deductibleexpenses.
Answer:
FALSE
Topic:
TaxCreditsandTaxDeductions
Skill:
Conceptual
Instruction21.1:
Usetheinformationtoanswerfollowingquestion(s).
RogueRiverExportersUSAhas$100,000ofbeforetaxforeignincome.Thehostcountryhasacorporateincometaxrateof25%andtheU.S.hasacorporateincometaxrateof35%.
22)
RefertoInstruction21.1.IftheU.S.hasnobilateraltradeagreementwiththehostcountry,whatisthetotalamountofincometaxesRogueRiverExporterswillpay?
A)
$25,000
B)
$35,000
C)
$51,250
D)
$60,000
Answer:
C
Topic:
InternationalTaxation
Skill:
Analytical
23)
RefertoInstruction21.1.IftheU.S.hasabilateraltradeagreementwiththehostcountrythatcallsforthetotaltaxpaidtobeequaltothemaximumamountthatcouldbepaidinthehighesttaxingcountry,whatisthetotalamountofincometaxesRogueRiverExporterswillpaytothehostcountry,andhowmuchwilltheypayinU.Sincometaxesontheforeignearnedincome?
A)
$25,000;$10,000
B)
$25,000;$26,250
C)
$35,000;$0
D)
Noneoftheabove
Answer:
A
Topic:
InternationalTaxation
Skill:
Analytical
24)
RefertoInstruction21.1.IftheU.S.treatedthetaxespaidonincomeearnedinthehostcountryasatax-deductibleexpense,thenRogueRiver'stotalU.S.corporatetaxontheforeignearningswouldbe________.
A)
$10,000
B)
$26,250
C)
$35,000
D)
$51,250
Answer:
B
Topic:
InternationalTaxation
Skill:
Analytical
25)
RefertoInstruction21.1.IftheU.S.treatedthetaxespaidonincomeearnedinthehostcountryasatax-credit,thenRogueRiver'stotalU.S.corporatetaxontheforeignearningswouldbe________.
A)
$51,250
B)
$35,000
C)
$26,250
D)
$10,000
Answer:
D
Topic:
InternationalTaxation
Skill:
Analytical
26)
WhichofthefollowingfactorsisnotimportantforU.S.corporationsfordeterminingtheamountofforeigntaxcreditallowedfordirecttaxespaidonincomeinaforeigncountry?
A)
theForeigncorporateincometaxrate
B)
theU.S.corporateincometaxrate
C)
theforeigncorporatedividendwithholdingtaxrate
D)
Alloftheaboveareimportantfactors.
Answer:
D
Topic:
InternationalTaxation
Skill:
Recognition
27)
Taxtreatiestypicallyresultin________betweenthetwocountriesinquestion.
A)
lowerpropertytaxesforU.S.citizensoverseas
B)
eliminationofdifferentialtaxrates
C)
increaseddoubletaxation
D)
reducedwithholdingtaxrates
Answer:
D
Topic:
TaxTreaties
Skill:
Recognition
28)
Thevalue-addedtaxis
A)
similartoanadvaloremtaxonimports.
B)
aformofdirecttaxationoncorporateincome.
C)
aformofnationalsalestax.
D)
noneoftheabove.
Answer:
C
Topic:
Value-addedTax
Skill:
Recognition
29)
Domestictaxneutralitymeansthat
A)
adollarearnedanywhereintheworldbyaU.S.corp
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