Question 1

In general,accrual basis taxpayers recognize income when it is earned,regardless of when it is received.

Accepted Answer

A) True 
 B)False

Question 2

Automobiles placed in service in 2013 generally have a 3-year cost recovery period under the Modified Accelerated Cost Recovery System MACRS).

Accepted Answer

A) True 
 B)False

Question 3

Vernon is a cash basis taxpayer with a calendar tax year.On November 1,2013,Vernon entered into a lease to rent a building for use in his business at $4,000 a month.On that day Vernon paid 18 months rent on the building,a total of $72,000 $4,000 * 18 months).How much may Vernon deduct for rent expense on his 2013 tax return?

Accepted Answer

A) $4,000 
B) $8,000 
C) $16,000 
D) $24,000 
E) None of the above 
A) $4,000 
B) $8,000 
C) $16,000 
D) $24,000 
E) None of the above

Question 4

If a cash basis business owner pays 18 months of rent expense in advance during the last month of the tax year,how is this treated on the tax return? What is the reason tax law requires this treatment?

Accepted Answer

The cash basis business owner is not all

Question 5

Jasper is a self-employed businessman.On March 5,2013 he purchases a personal computer for use at his home.He uses the computer for personal purposes 50 percent of the time and for business use the remainder of the time.The computer cost $2,100.Jasper wants to claim the maximum amount of depreciation possible for 2013,including the election to expense,if it is available.What is the amount of depreciation that Jasper should claim on the computer for 2013?

Accepted Answer

A) $2,100 
B) $1,050 
C) $420 
D) $210 
E) Some amount less than the above amounts 
A) $2,100 
B) $1,050 
C) $420 
D) $210 
E) Some amount less than the above amounts

Question 6

Which one of the following is true about Modified Accelerated Cost Recovery System MACRS)?

Accepted Answer

A) A building is depreciated using 200 percent declining balance depreciation. 
B) Buildings and autos both have the same depreciation life. 
C) A light duty business truck is depreciated using accelerated depreciation. 
D) All of the above are false. 
A) A building is depreciated using 200 percent declining balance depreciation. 
B) Buildings and autos both have the same depreciation life. 
C) A light duty business truck is depreciated using accelerated depreciation. 
D) All of the above are false.

Question 7

Mark the correct answer.Section 197 intangibles:

Accepted Answer

A) Are amortized based on current fair market value rather than their actual cost. 
B) Must be amortized over a 15 year life,regardless of their actual life. 
C) Include intangible assets created and not purchased by the taxpayer. 
D) Do not include purchased goodwill or going-concern value. 
A) Are amortized based on current fair market value rather than their actual cost. 
B) Must be amortized over a 15 year life,regardless of their actual life. 
C) Include intangible assets created and not purchased by the taxpayer. 
D) Do not include purchased goodwill or going-concern value.

Question 8

If an automobile is purchased for 100 percent use in the taxpayer's business,the annual automobile depreciation limitations do not apply.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is true with respect to the related party rules?

Accepted Answer

A) Bill sells stock to his sister for a $3,000 loss.Bill can deduct the loss on his tax return. 
B) A taxpayer's uncle is a related party for purposes of Section 267. 
C) A disallowed loss on a related party transaction can be used to offset any future gain when the property is sold to an unrelated party. 
D) Under the constructive ownership rules of Section 267,a shareholder owns 10 percent of the stock owned by a corporation in which he or she is a shareholder. 
E) None of the above are true. 
A) Bill sells stock to his sister for a $3,000 loss.Bill can deduct the loss on his tax return. 
B) A taxpayer's uncle is a related party for purposes of Section 267. 
C) A disallowed loss on a related party transaction can be used to offset any future gain when the property is sold to an unrelated party. 
D) Under the constructive ownership rules of Section 267,a shareholder owns 10 percent of the stock owned by a corporation in which he or she is a shareholder. 
E) None of the above are true.

Question 10

Kate is an accrual basis,calendar-year taxpayer.On November 1,2013,Kate leased out a building for $4,000 a month.On that day Kate received 6 months rental income on the building,a total of $24,000 $4,000 *6 months).How much income must Kate include on her 2013 tax return as a result of this transaction?

Accepted Answer

A) $4,000 
B) $8,000 
C) $16,000 
D) $24,000 
E) None of the above 
A) $4,000 
B) $8,000 
C) $16,000 
D) $24,000 
E) None of the above

Question 11

Betty purchases a used $12,000 car in 2013,to use exclusively in her business.
a.What will the standard MACRS depreciation schedule be for the 6 years the auto is depreciated? Year 1:
Year 2:
Year 3:
Year 4:
Year 5:
Year 6:
b.If Betty holds the car until it is fully depreciated,and uses straight-line depreciation,how many years will this take?

Accepted Answer

a.Since the car costs only $12,000,it is

Question 12

What is the maximum depreciation expense deduction for Year 2 2014)for a passenger automobile,used 100 percent for qualified business use,placed in service on June 15,2013 and costing $12,000 the election to expense is not made and no bonus depreciation was taken)?

Accepted Answer

A) $3,840 
B) $4,900 
C) $3,060 
D) $2,400 
E) None of the above 
A) $3,840 
B) $4,900 
C) $3,060 
D) $2,400 
E) None of the above

Question 13

The Dot Corporation has changed its year-end from a calendar year-end to July 31.The income for its short period from January 1 to July 31 is $35,000.The tax for this short period is:

Accepted Answer

A) $5,250 
B) $5,833 
C) $9,000 
D) $10,000 
A) $5,250 
B) $5,833 
C) $9,000 
D) $10,000

Question 14

In applying the statutory rates from the MACRS tables,the cost of the asset must first be reduced by the prior year's depreciation.

Accepted Answer

A) True 
 B)False

Question 15

Depreciation refers to the physical deterioration or loss of value of an asset.

Accepted Answer

A) True 
 B)False

Question 16

Most partnerships,S corporations,and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

Accepted Answer

A) True 
 B)False

Question 17

If a corporation has a short tax year,other than their first or last year of operation,explain how the corporation calculates the tax for the short period.

Accepted Answer

Corporations with a short tax year are r

Question 18

Depreciation is the process of allocating the cost of assets to expense over a period of years.

Accepted Answer

A) True 
 B)False

Question 19

Jerry and Julie are brother and sister.Jerry sold stock to Julie for $5,000,its fair market value.The stock cost Jerry $10,000 5 years ago.Also,Jerry sold Carol an unrelated party)stock for $2,000 that cost $10,000 3 years ago.What is Jerry's recognized loss before the $3,000 capital loss limitation?

Accepted Answer

A) $0 
B) $8,000 
C) $5,000 
D) $13,000 
E) $14,000 
A) $0 
B) $8,000 
C) $5,000 
D) $13,000 
E) $14,000

Question 20

Goodwill is considered to be a Section 197 asset amortized over 15 years for tax purposes.

Accepted Answer

A) True 
 B)False

In general,accrual basis taxpayers recognize income when it is earned,regardless of when it is received.

Automobiles placed in service in 2013 generally have a 3-year cost recovery period under the Modified Accelerated Cost Recovery System MACRS).

If a cash basis business owner pays 18 months of rent expense in advance during the last month of the tax year,how is this treated on the tax return? What is the reason tax law requires this treatment?

Which one of the following is true about Modified Accelerated Cost Recovery System MACRS)?

Mark the correct answer.Section 197 intangibles:

If an automobile is purchased for 100 percent use in the taxpayer's business,the annual automobile depreciation limitations do not apply.

Which of the following is true with respect to the related party rules?

What is the maximum depreciation expense deduction for Year 2 2014)for a passenger automobile,used 100 percent for qualified business use,placed in service on June 15,2013 and costing $12,000 the election to expense is not made and no bonus depreciation was taken)?

The Dot Corporation has changed its year-end from a calendar year-end to July 31.The income for its short period from January 1 to July 31 is $35,000.The tax for this short period is:

In applying the statutory rates from the MACRS tables,the cost of the asset must first be reduced by the prior year's depreciation.

Depreciation refers to the physical deterioration or loss of value of an asset.

Most partnerships,S corporations,and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

If a corporation has a short tax year,other than their first or last year of operation,explain how the corporation calculates the tax for the short period.

Depreciation is the process of allocating the cost of assets to expense over a period of years.

Goodwill is considered to be a Section 197 asset amortized over 15 years for tax purposes.

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

In general,accrual basis taxpayers recognize income when it is earned,regardless of when it is received.

Automobiles placed in service in 2013 generally have a 3-year cost recovery period under the Modified Accelerated Cost Recovery System MACRS).

If a cash basis business owner pays 18 months of rent expense in advance during the last month of the tax year,how is this treated on the tax return? What is the reason tax law requires this treatment?

Which one of the following is true about Modified Accelerated Cost Recovery System MACRS)?

Mark the correct answer.Section 197 intangibles:

If an automobile is purchased for 100 percent use in the taxpayer's business,the annual automobile depreciation limitations do not apply.

Which of the following is true with respect to the related party rules?

What is the maximum depreciation expense deduction for Year 2 2014)for a passenger automobile,used 100 percent for qualified business use,placed in service on June 15,2013 and costing $12,000 the election to expense is not made and no bonus depreciation was taken)?

The Dot Corporation has changed its year-end from a calendar year-end to July 31.The income for its short period from January 1 to July 31 is $35,000.The tax for this short period is:

In applying the statutory rates from the MACRS tables,the cost of the asset must first be reduced by the prior year's depreciation.

Depreciation refers to the physical deterioration or loss of value of an asset.

Most partnerships,S corporations,and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

If a corporation has a short tax year,other than their first or last year of operation,explain how the corporation calculates the tax for the short period.

Depreciation is the process of allocating the cost of assets to expense over a period of years.

Goodwill is considered to be a Section 197 asset amortized over 15 years for tax purposes.

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