Question 1

Under the specific charge-off method, a deduction for a bad debt is taken when the debt is determined to be worthless.

Accepted Answer

A) True 
 B)False

Question 2

Bobby is an accountant who uses a portion of his home as his office. His home is 2,500 square feet and his office space occupies 1,500 square feet. Rent expense is $18,000 a year; utilities expense is $2,000 a year; and maintenance expense is $3,000 a year. What is the total amount of these expenses that can be allocated to his home office?

Accepted Answer

A) $5,800 
B) $9,200 
C) $9,280 
D) $13,800 
E) $23,000 
A) $5,800 
B) $9,200 
C) $9,280 
D) $13,800 
E) $23,000

Question 3

Patricia is a business owner who is trying to determine her cost of goods sold for 2015. She bought 20 units of inventory at $11, then 26 units at $10, and finally 18 units at $14. She sold 30 units at an average price of $16 per unit in 2015 and uses FIFO for her inventory valuation. What was her cost of goods sold in 2015, assuming that there was no inventory at the beginning of the year? ​

Accepted Answer

A) $320 
B) $330 
C) $480 
D) $732 
E) None of the above 
A) $320 
B) $330 
C) $480 
D) $732 
E) None of the above

Question 4

Greg, a self-employed plumber, commutes from his home to his office which is 10 miles away. He loads his truck for the day with the parts that he needs. Then he is off to see his first customer of the day, Mr. Smith. Mr. Smith is 5 miles away from the office. After Mr. Smith's job, Greg goes to his next plumbing client, Martin's Dry Cleaning, which is 21 miles away from Mr. Smith. Greg spends the rest of the day at Martin's Dry Cleaning. From Martin's Dry Cleaning, Greg goes home which is now only 7 miles away. How much can Greg count as deductible transportation miles? ​

Accepted Answer

A) None of it 
B) 21 miles 
C) 26 miles 
D) 43 miles 
A) None of it 
B) 21 miles 
C) 26 miles 
D) 43 miles

Question 5

Janine is a sole proprietor owning a small specialty store. The business records show that the cost of the store's individual inventory items has been steadily increasing. The cost of the end of the year inventory is $125,000 and the cost of the beginning of the year inventory was $150,000. Janine uses the LIFO method of inventory valuation. Which of the following statements is true? ​

Accepted Answer

A) Janine purchased more inventory during the year than she sold during the same one-year period. 
B) Janine would have a higher net income if she used the FIFO method of inventory valuation instead of the LIFO method. 
C) Janine has apparently increased the volume of items in her ending inventory as compared to the number of items in her beginning inventory. 
D) Since the cost of the store's inventory items is increasing, Janine will have a smaller cost of goods sold amount on a LIFO basis than on a FIFO basis. 
E) None of the above. 
A) Janine purchased more inventory during the year than she sold during the same one-year period. 
B) Janine would have a higher net income if she used the FIFO method of inventory valuation instead of the LIFO method. 
C) Janine has apparently increased the volume of items in her ending inventory as compared to the number of items in her beginning inventory. 
D) Since the cost of the store's inventory items is increasing, Janine will have a smaller cost of goods sold amount on a LIFO basis than on a FIFO basis. 
E) None of the above.

Question 6

Patrick has a business net operating loss of $70,000 in 2015. Patrick's business generated significant taxable profits in 2013 and in 2014. Which of the following is true? ​

Accepted Answer

A) Patrick may offset income he generated in 2013 and 2014 with 2015's net operating loss by carrying the net operating loss back to each of those tax years.The remaining net operating loss (if any) can be carried forward and used to offset future taxable income. 
B) Patrick may use the net operating loss to offset income from any year he chooses. 
C) Net operating losses can offset only future income. 
D) Patrick may elect to offset the income he generated in 2014 with 2015's net operating loss.The remaining net operating loss (if any) can be used to offset future taxable income. 
E) None of the above. 
A) Patrick may offset income he generated in 2013 and 2014 with 2015's net operating loss by carrying the net operating loss back to each of those tax years.The remaining net operating loss (if any) can be carried forward and used to offset future taxable income. 
B) Patrick may use the net operating loss to offset income from any year he chooses. 
C) Net operating losses can offset only future income. 
D) Patrick may elect to offset the income he generated in 2014 with 2015's net operating loss.The remaining net operating loss (if any) can be used to offset future taxable income. 
E) None of the above.

Question 7

Which of the following items incurred while on travel is not considered a travel expense?

Accepted Answer

A) The cost of meals 
B) The cost of lodging 
C) Transportation costs 
D) Cost of entertaining clients 
E) None of the above 
A) The cost of meals 
B) The cost of lodging 
C) Transportation costs 
D) Cost of entertaining clients 
E) None of the above

Question 8

If a per diem method is not used, which of the following items is not required as substantiation for the deduction of a travel expense?

Accepted Answer

A) Amount spent 
B) Destination 
C) Business reason for the trip 
D) Departure and return dates 
E) All of the above must be substantiated 
A) Amount spent 
B) Destination 
C) Business reason for the trip 
D) Departure and return dates 
E) All of the above must be substantiated

Question 9

Mary is an insurance salesperson and a member of the Country Club. During 2015, Mary used the club 40 percent for entertaining clients (directly-related use) and 60 percent for pleasure. She incurred the following expenses at the Country Club:
Calculate the amount that Mary is allowed to deduct as entertainment expense.

Accepted Answer

$1,200 = 5

Question 10

Sally and Martha are tax accountant partners operating a tax firm in San Diego. Every year, they attend the Tax Planning Forum in Las Vegas featuring nationally renowned tax experts. The Forum lasts for 2 days. One evening Sally and Martha attend a show and another evening they lose $10 gambling on the nickel slot machines. Their expenses are as follows:
Calculate the firm's educational expense deduction for the current year.

Accepted Answer

$1,790 = $

Question 11

In his spare time, Fred likes to restore old furniture and sell it to his friends. He is a lawyer by trade. During 2015, he sells $500 worth of furniture and has $21,000 worth of expenses. Which one of the following is true?

Accepted Answer

A) Fred may deduct all $21,000 of his expenses because Fred is engaged in a hobby. 
B) Fred may deduct all $21,000 of his expenses because Fred is engaged in a trade or business. 
C) Fred cannot deduct any of the expenses because he is engaged in a hobby. 
D) Fred's deductions are limited to the income from selling furniture because he is engaged in a hobby. 
E) None of the above. 
A) Fred may deduct all $21,000 of his expenses because Fred is engaged in a hobby. 
B) Fred may deduct all $21,000 of his expenses because Fred is engaged in a trade or business. 
C) Fred cannot deduct any of the expenses because he is engaged in a hobby. 
D) Fred's deductions are limited to the income from selling furniture because he is engaged in a hobby. 
E) None of the above.

Question 12

Peter is a self-employed attorney. He gives the following information about his business to his CPA for use in preparing his 2015 tax return:
Peter also drove his car 5,191 miles for business and used the standard mileage method for computing transportation costs. How much will Peter show on his Schedule C for 2015 for:   
a.Income
b.Tax deductible expenses
c.Taxable income

Accepted Answer

The answer of Peter is a self-employed attorney. He gives...

Question 13

Christine is a self-employed tax accountant who drives her car to visit clients occasionally throughout the year. She drives her car 1,000 miles for business, 5,000 miles for commuting and 5,000 miles for personal use. Assuming that Christine uses the standard mileage method, how much is her auto expense for the year? Where in her tax return should Christine claim this deduction?

Accepted Answer

The business auto expense is $

Question 14

To be deductible as the cost of special work clothing or uniforms:

Accepted Answer

A) The clothing must not be suitable for everyday use and must be required as a condition of the job. 
B) The clothing must be required as a condition of the job, but can also be suitable for everyday use. 
C) The clothing need not be required as a condition of the job, but must not be suitable for everyday use. 
D) Only the cost of the clothing is included; upkeep is not deductible. 
A) The clothing must not be suitable for everyday use and must be required as a condition of the job. 
B) The clothing must be required as a condition of the job, but can also be suitable for everyday use. 
C) The clothing need not be required as a condition of the job, but must not be suitable for everyday use. 
D) Only the cost of the clothing is included; upkeep is not deductible.

Question 15

Vinnie has a small retail store and sells one product. His beginning inventory consisted of 1,000 products at $4 each for a total of $4,000. During the year, Vinnie made the following purchases of the product:
March 1 5,000 products at $5 each = $25,000
August 1 1,000 products at $6 each = $ 6,000
​
Vinnie uses the FIFO method of inventory valuation and he sells 5,000 products during the current year.
a.Calculate the total cost of goods available for sale.
b.Calculate the cost of the ending inventory.
c.Calculate the cost of goods sold.

Accepted Answer

The answer of Vinnie has a small retail store and...

Question 16

Marco makes the following business gifts during the year:
Marco also spent $15 on wrapping paper and a card for the above gift to the Whites.
Calculate Marco's total allowed deduction for gifts.

Accepted Answer

The answer of Marco makes the following business gifts during...

Question 17

Candace uses an office in her home exclusively for her business. The business use of the home is 100 sq ft out of 2,000 sq ft for the entire home. The total expenses to allocate are $3,000. Candace wishes to maximize her deduction ​in 2015. What is the amount of her home office deduction before any income limitations?

Accepted Answer

$500. If Candace allocates the

Question 18

If a taxpayer works at two or more jobs during the same day, he or she may deduct the cost of transportation from one job to the other.

Accepted Answer

A) True 
 B)False

Question 19

The expense of travel as a form of education is not deductible.

Accepted Answer

A) True 
 B)False

Question 20

Rick is a business adviser who lives in Escondido, California and works in San Diego. He makes a 70-mile round trip commute to his job every workday, for a total of 14,000 miles a year. In addition, he drives 1,000 miles throughout the year to visit clients from his office in San Diego. If Rick uses the standard mileage method for computing automobile expenses, what is his automobile expense deduction for 2015?

Accepted Answer

$575 = 1,000 miles ×

Under the specific charge-off method, a deduction for a bad debt is taken when the debt is determined to be worthless.

Patrick has a business net operating loss of $70,000 in 2015. Patrick's business generated significant taxable profits in 2013 and in 2014. Which of the following is true?

Which of the following items incurred while on travel is not considered a travel expense?

If a per diem method is not used, which of the following items is not required as substantiation for the deduction of a travel expense?

In his spare time, Fred likes to restore old furniture and sell it to his friends. He is a lawyer by trade. During 2015, he sells $500 worth of furniture and has $21,000 worth of expenses. Which one of the following is true?

To be deductible as the cost of special work clothing or uniforms:

Marco makes the following business gifts during the year: Marco also spent $15 on wrapping paper and a card for the above gift to the Whites. Calculate Marco's total allowed deduction for gifts.

If a taxpayer works at two or more jobs during the same day, he or she may deduct the cost of transportation from one job to the other.

The expense of travel as a form of education is not deductible.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 3: Business Income and Expenses, Part I

Under the specific charge-off method, a deduction for a bad debt is taken when the debt is determined to be worthless.

Patrick has a business net operating loss of $70,000 in 2015. Patrick's business generated significant taxable profits in 2013 and in 2014. Which of the following is true? ​

Which of the following items incurred while on travel is not considered a travel expense?

If a per diem method is not used, which of the following items is not required as substantiation for the deduction of a travel expense?

In his spare time, Fred likes to restore old furniture and sell it to his friends. He is a lawyer by trade. During 2015, he sells $500 worth of furniture and has $21,000 worth of expenses. Which one of the following is true?

To be deductible as the cost of special work clothing or uniforms:

Marco makes the following business gifts during the year: Marco also spent $15 on wrapping paper and a card for the above gift to the Whites. Calculate Marco's total allowed deduction for gifts.

If a taxpayer works at two or more jobs during the same day, he or she may deduct the cost of transportation from one job to the other.

The expense of travel as a form of education is not deductible.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Patrick has a business net operating loss of $70,000 in 2015. Patrick's business generated significant taxable profits in 2013 and in 2014. Which of the following is true?