Question 1

If an asset's actual useful life is longer than the assigned recovery period,the MACRS tables cannot be used.

Accepted Answer

A) True 
 B)False  False

Question 2

Maintenance costs for capital assets are deducted in the year the amount is paid or incurred.

Accepted Answer

A) True 
 B)False  True

Question 3

Under MACRS,the same method of depreciation accelerated or straight-line)must be used for all property in a given class placed in service during that year.

Accepted Answer

A) True 
 B)False  True

Question 4

Expenditures incurred to maintain an asset in good operating condition must be depreciated over the remaining useful life of the asset.

Accepted Answer

A) True 
 B)False

Question 5

Under the cash basis of accounting,expenses are generally deducted in the year they are paid.

Accepted Answer

A) True 
 B)False

Question 6

On July 15,2013,H.P.purchases a personal computer for his home.The computer cost $3,000.H.P.uses the computer 55 percent of the time in his business,20 percent of the time for managing his investments and the remaining 25 percent of the time for various personal uses.Calculate H.P.'s maximum depreciation deduction for 2013 for the computer,assuming he does not make the election to expense or take bonus depreciation.

Accepted Answer

$450 = $3,000 *20% * 55% + 20%

Question 7

William,a cash-basis sole proprietor,had the following receipts and disbursements for 2013: $\begin{array}{ll}
\text { Gross receipts } & \$ 60,000 \
\text { Cost of sal es } & \$ 30,000\
\text { Other operating expenses }&\$6,000\
\text { Medical expenses }&\$600
\end{array}$ For 2013,what amount should William report as net earnings from self-employment?

Accepted Answer

A) $30,000 
B) $24,600 
C) $24,000 
D) $23,400 
E) None of the above 
A) $30,000 
B) $24,600 
C) $24,000 
D) $23,400 
E) None of the above

Question 8

To be depreciated,must an asset actually lose value each year?

Accepted Answer

No.For tax purposes,the term depreciatio

Question 9

Becky is a cash basis taxpayer with the following transactions during her calendar tax year: $\begin{array}{l}
\text { Cash basis revenue}&\$ 54,000\
\text {Cash basis expenses, except rent  }& \$ 25,000\\text { Rent expense (paid on December } 1 \text { ) for use of a building for } 18 \text { months }&\$36,000
\end{array}$
 What is the amount of Becky's taxable income from her business for this tax year?

Accepted Answer

A) $17,000 
B) $23,000 
C) $25,000 
D) $27,000 
E) None of the above 
A) $17,000 
B) $23,000 
C) $25,000 
D) $27,000 
E) None of the above

Question 10

An asset other than a passenger automobile is placed in service on May 15,2013 and has a depreciable basis of $32,000.The asset is in the 7-year recovery class.What is the maximum depreciation deduction that may be claimed for 2013,excluding the election to expense and bonus depreciation?

Accepted Answer

A) $2,286 
B) $32,000 
C) $4,573 
D) $2,960 
E) None of the above 
A) $2,286 
B) $32,000 
C) $4,573 
D) $2,960 
E) None of the above

Question 11

John purchases residential rental property on October 31,2013 for a cost of $290,000.Of this amount, $140,000 is allocable to the cost of the home and the remaining $150,000 is allocable to the cost of the land.What is John's maximum depreciation deduction for 2013?

Accepted Answer

A) $2,198 
B) $1,099 
C) $1,061 
D) $850 
E) None of the above 
A) $2,198 
B) $1,099 
C) $1,061 
D) $850 
E) None of the above

Question 12

On January 1,2013,Ted purchased a small software company for $200,000.He paid $95,000 for the fixed assets of the company and $105,000 for goodwill.How much amortization may Ted deduct on his 2013 tax return for the purchased goodwill?

Accepted Answer

A) $0 
B) $7,000 
C) $15,000 
D) $21,000 
E) $105,000 
A) $0 
B) $7,000 
C) $15,000 
D) $21,000 
E) $105,000

Question 13

Lanyard purchased office equipment 7-year property)for use in his business.He paid $100,000 for the equipment on July 1,2013.Lanyard did not purchase any other property during the year.For 2013,his business had net income of $350,000,before depreciation and before considering the election to expense.
a.What is the maximum amount that Lanyard can deduct in 2013 under the election to expense?
b.What is the total depreciation regular depreciation and the amount allowed under the election to expense)on the office equipment for 2013,assuming Lanyard uses the accelerated method under MACRS and claims the maximum amount allowable under the election to expense?
c.What is Lanyard's total depreciation deduction for 2014 on the 2013 purchase of equipment?

Accepted Answer

a.$100,000 may be de

Question 14

The hybrid method of accounting involves the use of both the accrual and cash methods of accounting.

Accepted Answer

A) True 
 B)False

Question 15

On August 21,2013,Jay purchased a commercial building.The cost basis assigned to the building is
$800,000.Jay also owns a residential apartment building he purchased on June 15,2012 with a cost basis of $500,000.
a.Calculate Jay's total depreciation deduction for the buildings for 2013,using MACRS.
b.Calculate Jay's total depreciation deduction for the apartment building for 2014,using MACRS.

Accepted Answer

The answer of On August 21,2013,Jay purchased a commercial building.The...

Question 16

Calculate the following amounts:
a.The first year of depreciation on a residential rental building costing $100,000,purchased on August 30.
b.The first year of depreciation on an auto used 100 percent in business,costing $30,000,purchased in May,2013.No bonus depreciation deducted).
c.The second year of depreciation on a computer used exclusively for business,costing $8,000,purchased May 2012.
d.The third year of depreciation on business furniture costing $1,000,purchased in July 2011,using the half-year convention and accelerated depreciation.

Accepted Answer

a.$1,364 = 1.364% x $100,000
b

Question 17

Sales of property at a gain may be restricted under the related party rules of the Internal Revenue Code.

Accepted Answer

A) True 
 B)False

Question 18

On January 1,2013,Roxburgia Company places a commercial storage building in service.The costs allocated to construction of the building total $300,000 and land is accounted for separately.Which of the following is a true statement with respect to the depreciation of the building?

Accepted Answer

A) The period over which the building must be depreciated is shorter than the period over which a residential building must be depreciated. 
B) Since the building was placed in service on the first day of the year,the depreciation expense for each year the building is used,except for the year of disposition,will be the same amount. 
C) Since the land is accounted for separately,the amount of depreciation expense for the building cannot be determined from the information given. 
D) The depreciation expense for Year 2 would be the same regardless of whether the building is placed in service on January 1,2013 or February 1,2013. 
E) All of the above. 
A) The period over which the building must be depreciated is shorter than the period over which a residential building must be depreciated. 
B) Since the building was placed in service on the first day of the year,the depreciation expense for each year the building is used,except for the year of disposition,will be the same amount. 
C) Since the land is accounted for separately,the amount of depreciation expense for the building cannot be determined from the information given. 
D) The depreciation expense for Year 2 would be the same regardless of whether the building is placed in service on January 1,2013 or February 1,2013. 
E) All of the above.

Question 19

On June 1,2013,Cork Oak Corporation purchased a passenger automobile for 100 percent use in its business.The auto,with a cost basis of $22,000,has a 5-year estimated life.It also is 5-year recovery property.How much depreciation should be taken for 2013,assuming Cork Oak Corporation uses the accelerated depreciation method under MACRS but does not choose to make the election to expense or take bonus depreciation?

Accepted Answer

A) $3,160 
B) $2,100 
C) $4,900 
D) $4,400 
E) None of the above 
A) $3,160 
B) $2,100 
C) $4,900 
D) $4,400 
E) None of the above

Question 20

Choose the incorrect statement.

Accepted Answer

A) Books and records may be kept on a different year-end basis than the year-end used for tax purposes. 
B) The choice to file on a fiscal year-end basis must be made with an initial tax return. 
C) Almost all individuals file tax returns using a calendar year accounting period. 
D) An individual may request IRS approval to change to a fiscal year-end basis if certain conditions are met. 
A) Books and records may be kept on a different year-end basis than the year-end used for tax purposes. 
B) The choice to file on a fiscal year-end basis must be made with an initial tax return. 
C) Almost all individuals file tax returns using a calendar year accounting period. 
D) An individual may request IRS approval to change to a fiscal year-end basis if certain conditions are met.

If an asset's actual useful life is longer than the assigned recovery period,the MACRS tables cannot be used.

Maintenance costs for capital assets are deducted in the year the amount is paid or incurred.

Under MACRS,the same method of depreciation accelerated or straight-line)must be used for all property in a given class placed in service during that year.

Expenditures incurred to maintain an asset in good operating condition must be depreciated over the remaining useful life of the asset.

Under the cash basis of accounting,expenses are generally deducted in the year they are paid.

William,a cash-basis sole proprietor,had the following receipts and disbursements for 2013: Gross receipts \ 60,000 Cost of sal es \ 30,000 Other operating expenses \6 ,000 Medical expenses \6 00 For 2013,what amount should William report as net earnings from self-employment?

To be depreciated,must an asset actually lose value each year?

An asset other than a passenger automobile is placed in service on May 15,2013 and has a depreciable basis of $32,000.The asset is in the 7-year recovery class.What is the maximum depreciation deduction that may be claimed for 2013,excluding the election to expense and bonus depreciation?

John purchases residential rental property on October 31,2013 for a cost of $290,000.Of this amount, $140,000 is allocable to the cost of the home and the remaining $150,000 is allocable to the cost of the land.What is John's maximum depreciation deduction for 2013?

On January 1,2013,Ted purchased a small software company for $200,000.He paid $95,000 for the fixed assets of the company and $105,000 for goodwill.How much amortization may Ted deduct on his 2013 tax return for the purchased goodwill?

The hybrid method of accounting involves the use of both the accrual and cash methods of accounting.

Sales of property at a gain may be restricted under the related party rules of the Internal Revenue Code.

On January 1,2013,Roxburgia Company places a commercial storage building in service.The costs allocated to construction of the building total $300,000 and land is accounted for separately.Which of the following is a true statement with respect to the depreciation of the building?

Choose the incorrect statement.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 7: Accounting Periods and Methods and Depreciation

If an asset's actual useful life is longer than the assigned recovery period,the MACRS tables cannot be used.

Maintenance costs for capital assets are deducted in the year the amount is paid or incurred.

Under MACRS,the same method of depreciation accelerated or straight-line)must be used for all property in a given class placed in service during that year.

Expenditures incurred to maintain an asset in good operating condition must be depreciated over the remaining useful life of the asset.

Under the cash basis of accounting,expenses are generally deducted in the year they are paid.

William,a cash-basis sole proprietor,had the following receipts and disbursements for 2013: Gross receipts \ 60,000 Cost of sal es \ 30,000 Other operating expenses \6 ,000 Medical expenses \6 00 For 2013,what amount should William report as net earnings from self-employment?

To be depreciated,must an asset actually lose value each year?

An asset other than a passenger automobile is placed in service on May 15,2013 and has a depreciable basis of $32,000.The asset is in the 7-year recovery class.What is the maximum depreciation deduction that may be claimed for 2013,excluding the election to expense and bonus depreciation?

John purchases residential rental property on October 31,2013 for a cost of $290,000.Of this amount, $140,000 is allocable to the cost of the home and the remaining $150,000 is allocable to the cost of the land.What is John's maximum depreciation deduction for 2013?

On January 1,2013,Ted purchased a small software company for $200,000.He paid $95,000 for the fixed assets of the company and $105,000 for goodwill.How much amortization may Ted deduct on his 2013 tax return for the purchased goodwill?

The hybrid method of accounting involves the use of both the accrual and cash methods of accounting.

Sales of property at a gain may be restricted under the related party rules of the Internal Revenue Code.

On January 1,2013,Roxburgia Company places a commercial storage building in service.The costs allocated to construction of the building total $300,000 and land is accounted for separately.Which of the following is a true statement with respect to the depreciation of the building?

Choose the incorrect statement.

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses, Part I

Business Income and Expenses, Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Capital Gains and Losses

Withholding, Estimated Payments, and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters