CBA CBA Tax Planning & Accounting Fundamentals 2

Question 1

The 'current ratio' is calculated as current assets divided by current liabilities and is used to measure a company's:

Accepted Answer

Short-term liquidity and ability to meet near-term obligations

Answer

The current ratio measures short-term liquidity, indicating whether a business has sufficient current assets to cover its current liabilities coming due within one year.

Question 2

Which depreciation method allocates an equal amount of an asset's cost to each year of its useful life?

Accepted Answer

Straight-line depreciation

Answer

Straight-line depreciation divides the asset's depreciable cost equally over its estimated useful life, resulting in the same depreciation expense each period.

Question 3

A business advisor recommends a client establish an accountable plan for employee expense reimbursements primarily to:

Accepted Answer

Ensure reimbursements are tax-free to employees and deductible to the employer

Answer

An IRS accountable plan requires adequate accounting of expenses and return of excess advances, making qualifying reimbursements excludable from employee income and deductible by the employer.

Question 4

EBITDA is a financial metric that stands for earnings before interest, taxes, depreciation, and amortization, and is commonly used to assess a business's:

Accepted Answer

Operational cash flow and core profitability

Answer

EBITDA strips out non-operating factors (interest, taxes) and non-cash charges (depreciation, amortization) to provide a cleaner view of a business's underlying operational performance.

Question 5

When advising a client on the tax treatment of startup costs, a CBA should know that the IRS allows businesses to deduct up to how much in startup costs in the year a business begins?

Accepted Answer

$5,000

Answer

Under IRC Section 195, businesses may deduct up to $5,000 in startup costs in the first year, with the remainder amortized over 180 months, subject to phase-out if total startup costs exceed $50,000.

(CBA) Certified Business Advisor Practice Test

(CBA) Certified Business Advisor Practice Test

CBA CBA Tax Planning & Accounting Fundamentals 2