Question 1

An accrual-basis taxpayer deducts an expense when the cash is paid even if the service for which the money is paid has not been rendered.

Accepted Answer

A) True 
 B)False  False

Question 2

George took a customer to dinner where they discussed business and then went to see a play. He spent $120 for the meal and left a $25 tip. Cab fare to the theater was $10 and George paid a scalper $200 for the two play tickets with a face value of $80 each. What is George's allowable deduction for these expenses if the expenses were incurred in 2017? How would your answer change if these expenses were incurred in 2018?

Accepted Answer

($120 + $25) x .5 dinner + $10 cab fare + .5 ($160) tickets = $72.50 + $10 + $80 = $162.50 total for 2017. No deduction for entertainment in 2018.

Question 3

Other Objective Questions
Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid.
-Cleo spent $4,000 on organization costs for her business and $13,000 training staff. If the business is a calendar-year cash-basis business that starts operations on June 1, what is the current year's deduction for these expenses?

Accepted Answer

A)  $17,000 
B)  $9,311 
C)  $9,000 
D)  $611 
A)  $17,000 
B)  $9,311 
C)  $9,000 
D)  $611 B

Question 4

George and Jeannie want to open a restaurant. They contribute $3,000 each for a survey to locate an appropriate area for their restaurant and $2,000 each for a real estate agent to locate a suitable building for them to buy. Shortly after this, Jeannie and George have a disagreement and Jeannie walks away from the plan. Although she asks George to reimburse her, he refuses. George then continues the project by himself. He spends $4,000 for legal and accounting fees to set the business up and $8,000 for staff training. What are the tax consequences to George and Jeannie for these expenditures when the restaurant opens in July?

Accepted Answer

Jeannie can do nothing with the money sh

Question 5

A taxpayer cannot take a deduction for a disputed amount until the amount in dispute is settled.

Accepted Answer

A) True 
 B)False

Question 6

In 2018, all corporations with at least $10 million in assets will be required to file Form 1120, Schedule UTP with their tax returns.

Accepted Answer

A) True 
 B)False

Question 7

Jacob Corporation decides to use the LIFO method of inventory valuation. Which of the following is true?

Accepted Answer

A)  Jacob can change to FIFO whenever it wishes. 
B)  Jacob must use LIFO in its financial statements. 
C)  Jacob will have higher taxable income if prices are rising. 
D)  Jacob can include FIFO information on the face of the income statements. 
A)  Jacob can change to FIFO whenever it wishes. 
B)  Jacob must use LIFO in its financial statements. 
C)  Jacob will have higher taxable income if prices are rising. 
D)  Jacob can include FIFO information on the face of the income statements.

Question 8

Other Objective Questions
Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid.
-On October 1, 2018, Fine Brands Corporation (a cash-basis, calendar-year taxpayer) borrowed $200,000 from the bank at 9% annual interest. On December 30, 2018, Fine Brands paid $18,000 to the bank for the first year's interest on the loan. How much can Garcia deduct in 2018 for interest expense?

Accepted Answer

A)  $1,500 
B)  $1,620 
C)  $4,500 
D)  $18,000 
A)  $1,500 
B)  $1,620 
C)  $4,500 
D)  $18,000

Question 9

If an expense is reported on the tax return before it is reported on the financial accounting books

Accepted Answer

A)  the result is a deferred tax asset 
B)  the result is a deferred tax liability 
C)  there could be either a deferred tax asset or liability 
D)  there is no effect as this is not a timing difference 
A)  the result is a deferred tax asset 
B)  the result is a deferred tax liability 
C)  there could be either a deferred tax asset or liability 
D)  there is no effect as this is not a timing difference

Question 10

In April 2018, Tobias, a sole proprietor, worked for a new client in the next county for the day. He drove 75 miles each way for the job, paid $4 in tolls, $7 for parking and $9 for lunch. What is his allowable business expense deduction?

Accepted Answer

A)  $56 
B)  $81.75 
C)  $92.75 
D)  $93.50 
A)  $56 
B)  $81.75 
C)  $92.75 
D)  $93.50

Question 11

If FIFO is used for inventory valuation instead of LIFO when prices are falling:

Accepted Answer

A)  Cost of goods sold will be less under FIFO than LIFO. 
B)  Cost of goods sold will be more under FIFO than LIFO. 
C)  Inventory value will be less under FIFO than LIFO. 
D)  There is no difference in inventory or cost of goods sold. 
A)  Cost of goods sold will be less under FIFO than LIFO. 
B)  Cost of goods sold will be more under FIFO than LIFO. 
C)  Inventory value will be less under FIFO than LIFO. 
D)  There is no difference in inventory or cost of goods sold.

Question 12

Perez Corporation paid the following expenses: $14,000 country club dues and $8,000 business meals. How much can Perez deduct for these expenses?

Accepted Answer

A)  $18,000 
B)  $11,000 
C)  $4,400 
D)  $4,000 
A)  $18,000 
B)  $11,000 
C)  $4,400 
D)  $4,000

Question 13

A deferred tax liability

Accepted Answer

A)  causes a business's effective tax rate to differ from the statutory rate. 
B)  can result from financial accounting revenues exceeding those recognized for tax purposes. 
C)  is effectively an interest-free loan from the government. 
D)  All of the above 
E)  (a) and (b) only 
A)  causes a business's effective tax rate to differ from the statutory rate. 
B)  can result from financial accounting revenues exceeding those recognized for tax purposes. 
C)  is effectively an interest-free loan from the government. 
D)  All of the above 
E)  (a) and (b) only

Question 14

What effect do the UNICAP rules generally have on business expenses?

Accepted Answer

The UNICAP rules require taxpayers to in

Question 15

Other Objective Questions
Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid.
-Meals and lodging expenses for a foreign business trip if personal days exceed business days.

Accepted Answer

The answer of Other Objective Questions
Designate whether the following expenses...

Question 16

Other Objective Questions
Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid.
-Which of the following is not required to deduct an expenditure as a business expense?

Accepted Answer

A)  ordinary and necessary 
B)  reasonable in amount 
C)  incurred by the taxpayer 
D)  recurring every year 
A)  ordinary and necessary 
B)  reasonable in amount 
C)  incurred by the taxpayer 
D)  recurring every year

Question 17

Haley, a self-employed individual, drove her automobile a total of 20,000 business miles in 2018. This represents about 75% of the auto's use. She has receipts as follows:   If Haley uses the standard mileage rate method, how much can she deduct as a business expense?

Accepted Answer

A)  $12,500 
B)  $11,600 
C)  $11,200 
D)  $11,000 
A)  $12,500 
B)  $11,600 
C)  $11,200 
D)  $11,000

Question 18

Jordan is a self-employed tax attorney who frequently entertains his clients at his country club. Jordan's club expenses include the following:   How much can Jordan deduct?

Accepted Answer

A)  $2,000 
B)  $5,000 
C)  $8,000 
D)  $9,000 
A)  $2,000 
B)  $5,000 
C)  $8,000 
D)  $9,000

Question 19

A cash basis taxpayer recognizes an expense when the cash is paid or the expense is charged to a credit card.

Accepted Answer

A) True 
 B)False

Question 20

Differentiate a deferred tax asset from a deferred tax liability.

Accepted Answer

A deferred tax asset arises from timing

An accrual-basis taxpayer deducts an expense when the cash is paid even if the service for which the money is paid has not been rendered.

A taxpayer cannot take a deduction for a disputed amount until the amount in dispute is settled.

In 2018, all corporations with at least $10 million in assets will be required to file Form 1120, Schedule UTP with their tax returns.

Jacob Corporation decides to use the LIFO method of inventory valuation. Which of the following is true?

If an expense is reported on the tax return before it is reported on the financial accounting books

In April 2018, Tobias, a sole proprietor, worked for a new client in the next county for the day. He drove 75 miles each way for the job, paid $4 in tolls, $7 for parking and $9 for lunch. What is his allowable business expense deduction?

If FIFO is used for inventory valuation instead of LIFO when prices are falling:

Perez Corporation paid the following expenses: $14,000 country club dues and $8,000 business meals. How much can Perez deduct for these expenses?

A deferred tax liability

What effect do the UNICAP rules generally have on business expenses?

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -Meals and lodging expenses for a foreign business trip if personal days exceed business days.

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -Which of the following is not required to deduct an expenditure as a business expense?

Haley, a self-employed individual, drove her automobile a total of 20,000 business miles in 2018. This represents about 75% of the auto's use. She has receipts as follows: If Haley uses the standard mileage rate method, how much can she deduct as a business expense?

Jordan is a self-employed tax attorney who frequently entertains his clients at his country club. Jordan's club expenses include the following: How much can Jordan deduct?

A cash basis taxpayer recognizes an expense when the cash is paid or the expense is charged to a credit card.

Differentiate a deferred tax asset from a deferred tax liability.

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters

Exam 6: Business Expenses

An accrual-basis taxpayer deducts an expense when the cash is paid even if the service for which the money is paid has not been rendered.

A taxpayer cannot take a deduction for a disputed amount until the amount in dispute is settled.

In 2018, all corporations with at least $10 million in assets will be required to file Form 1120, Schedule UTP with their tax returns.

Jacob Corporation decides to use the LIFO method of inventory valuation. Which of the following is true?

If an expense is reported on the tax return before it is reported on the financial accounting books

In April 2018, Tobias, a sole proprietor, worked for a new client in the next county for the day. He drove 75 miles each way for the job, paid $4 in tolls, $7 for parking and $9 for lunch. What is his allowable business expense deduction?

If FIFO is used for inventory valuation instead of LIFO when prices are falling:

Perez Corporation paid the following expenses: $14,000 country club dues and $8,000 business meals. How much can Perez deduct for these expenses?

A deferred tax liability

What effect do the UNICAP rules generally have on business expenses?

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -Meals and lodging expenses for a foreign business trip if personal days exceed business days.

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -Which of the following is not required to deduct an expenditure as a business expense?

Haley, a self-employed individual, drove her automobile a total of 20,000 business miles in 2018. This represents about 75% of the auto's use. She has receipts as follows: If Haley uses the standard mileage rate method, how much can she deduct as a business expense?

Jordan is a self-employed tax attorney who frequently entertains his clients at his country club. Jordan's club expenses include the following: How much can Jordan deduct?

A cash basis taxpayer recognizes an expense when the cash is paid or the expense is charged to a credit card.

Differentiate a deferred tax asset from a deferred tax liability.

Introduction to Taxation

The Tax Practice Environment

Determining Gross Income

Employee Compensation

Deductions for Individuals and Tax Determination

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Tax-Deferred Exchanges

Taxation of Corporations

Sole Proprietorships and Flow-Through Entities

Estates, Gifts, and Trusts

Filters