Exam 6: Business Expenses

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -Matthew, a car dealer in Atlanta, wants to open a restaurant in Miami. He spends $8,000 investigating the location and feasibility of opening the restaurant in 2018, Matthew opens the restaurant in Miami in November and spends an additional $7,000 in start-up costs. In 2018 Matthew can:

Attendance at business-related seminars or meetings would be deductible for all of the following except:

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 expenditures would not be deductible as a business expense?

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -Mortgage interest and taxes on the home in which a sole proprietor has a home office. Gross profit from the business is only $1,500.

Travel away from home on business is defined as being away from home for:

What are the basic requirements for a business expense to be deductible?

Clark Corporation has income per books before tax of $1,500,000. In computing income per books, Clark included $7,000 interest income from tax-exempt municipal bonds and deducted $10,000 for business meal expenses, $50,000 for depreciation expense using the straight-line method and $15,000 accrued for bad debt expense using the allowance method. It actually wrote off only $9,000 in bad debts this year and its tax depreciation expense was $80,000. What is Clark Corporation's taxable income?

Jensen Corporation plans to take a deduction on its tax return that it believes it is more likely than not that it will be sustained. It is not sure, however, of the exact amount that will be realized. It has established the following amounts and probabilities: What deduction should Jensen record on its financial statement?

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -Rent paid for one-year by contract on November 1 by an accrual-basis taxpayer.

Expenses must be ordinary, necessary, and reasonable to be fully deductible.

Jonathan is a self-employed consultant with a qualifying office in his home. The gross income from his business is $18,000 and he has $14,000 of business expenses other than those for his home office. His home office occupies 20% of the square footage of his home and the total expenses for his home include: $12,000 for mortgage interest, $4,000 for property taxes, $3,600 for utilities, and $1,500 for homeowner's insurance. Depreciation for the business portion of his home is $500. How much can Jonathan deduct for his home office expenses?

Allison Corporation (marginal tax rate of 21%) has $44,000 of tax depreciation in the current year. It also has a $40,000 bad debt deduction. For financial accounting, it has a total depreciation deduction of $28,000 and adds $50,000 to its bad debt reserve, the first year it has established a reserve. Determine if the corporation has a deferred tax asset or a deferred tax liability and its amount.

If an employer reimburses an employee for business meal expenses, the employer can only deduct 50 percent of the reimbursement.

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -John, a rental car dealer on Miami Beach, is considering opening a beauty salon in San Francisco. After spending $8,000 investigating such possibilities in San Francisco, John decides not to open the salon. As a consequence, the $8,000 is:

For transportation expenses for foreign travel of less than one week to be fully deductible, the days spent on business must exceed personal days.

Other Objective Questions Designate whether the following expenses are fully deductible (F), partially deductible (P), or nondeductible (N) in the year paid. -$200 interest on a loan that was used to purchase California State revenue bonds.