Question 1

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

Accepted Answer

A) True 
 B)False

Question 2

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 3

A taxpayer who adopts the LIFO method of inventory valuation for tax purposes may use the FIFO method for preparing financial statements.

Accepted Answer

A) True 
 B)False

Question 4

Sally and Martha are tax accountant partners sharing an office 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:
 $\begin{array}{lr}
\text { Airfare } & \$ 200 \
\text { Hotels } & 300 \
\text { Meals } & 150 \
\text { Forum registration } & 1,000 \
\text { Tickets to show } & 100 \
\text { Gambling loss } & 10 \
&\$1,760
\end{array}$ $\begin{array}{lr}
\text { Airfare } & \$ 200 \
\text { Hotels } & 300 \
\text { Meals } & 150 \
\text { Forum registration } & 1,000 \
\text { Tickets to show } & 100 \
\text { Gambling loss } & 10 \
&\$1,760
\end{array}$ Calculate the firm's educational expense deduction for the current year.

Accepted Answer

$1,575 = $

Question 5

Which of the following taxpayers may not use the standard mileage method of calculating transportation costs?

Accepted Answer

A) A self-employed CPA who drives a computer-equipped minivan to visit clients. 
B) A taxpayer who has a fleet of 10 business automobiles. 
C) A real estate salesperson who drives a $70,000 Mercedes while showing houses. 
D) An attorney who uses his Yaris for calling on clients. 
E) All of the above taxpayers may use the standard mileage method. 
A) A self-employed CPA who drives a computer-equipped minivan to visit clients. 
B) A taxpayer who has a fleet of 10 business automobiles. 
C) A real estate salesperson who drives a $70,000 Mercedes while showing houses. 
D) An attorney who uses his Yaris for calling on clients. 
E) All of the above taxpayers may use the standard mileage method.

Question 6

Ellen loans Nicole $45,000 to start a hair salon.Unfortunately,the business fails in 2013 and she is unable to pay back Ellen.In 2013,Ellen also had $20,000 of income from her part-time job and $12,000 of capital gain from the sale of stock.How much of the $45,000 bad debt can Ellen claim as a capital loss in 2013?

Accepted Answer

A) $45,000,with $33,000 carried forward to 2014 
B) $12,000 
C) $32,000 
D) $15,000,with $30,000 carried forward to 2014 
E) $0 
A) $45,000,with $33,000 carried forward to 2014 
B) $12,000 
C) $32,000 
D) $15,000,with $30,000 carried forward to 2014 
E) $0

Question 7

If a taxpayer takes a trip within the United States which is primarily for business,the cost of travel to and from the destination need not be prorated between the business and personal portion of the trip.

Accepted Answer

A) True 
 B)False

Question 8

Larry qualifies for a home office deduction.The amount of space devoted to the business is 500 square
feet of the total 2,000 square feet in his house.Larry's total rent on the house is $6,000,and he pays utilities other than telephone)of $3,000 for the year.Calculate Larry's deductions for home office expenses before the gross income limitation.
Rent expense Utilities
Total home office expenses

Accepted Answer

The answer of Larry qualifies for a home office deduction.The...

Question 9

The cost of a subscription to the New England Journal of Medicine is a deductible expense for a hospital intern.

Accepted Answer

A) True 
 B)False

Question 10

Karen was ill for most of the current year.She received tax-free disability income that covered most of her expenses.She paid the deductible expense of owning her home,interest on the mortgage,and property taxes out of this income.Her tax return shows negative taxable income of $25,000.How should this loss be treated?

Accepted Answer

Karen's loss may not be carried to previ

Question 11

Patricia is a business owner who is trying to determine her cost of goods sold for 2013.She bought 20 units of inventory at $11,then 26 units at $9,and finally 18 units at $14.She sold 30 units in 2013 and uses FIFO for her inventory valuation.What was her cost of goods sold in 2013,assuming that there was no inventory at the beginning of the year?

Accepted Answer

A) $706 
B) $310 
C) $360 
D) $330 
E) None of the above 
A) $706 
B) $310 
C) $360 
D) $330 
E) None of the above

Question 12

If the taxpayer does not maintain adequate records of the car expenses i.e. ,gas,tires,car insurance,etc. ),the standard mileage rate cannot be used.

Accepted Answer

A) True 
 B)False

Question 13

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 1,000 square feet.Rent expense is $20,000 a year;utilities expense is $1,200 a year;and maintenance expense is $2,000 a year.What is the total amount of these expenses that can be allocated to his home office?

Accepted Answer

A) $23,200 
B) $20,000 
C) $9,280 
D) $10,480 
E) $22,000 
A) $23,200 
B) $20,000 
C) $9,280 
D) $10,480 
E) $22,000

Question 14

The standard mileage rate for automobiles in 2013 is 56.5 cents per mile.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following expenses,incurred while on travel,does not qualify as a travel expense?

Accepted Answer

A) Tips 
B) Dry cleaning of suit 
C) Dinner at a steak house 
D) Gift purchased for a prospective customer $20) 
E) None of the above 
A) Tips 
B) Dry cleaning of suit 
C) Dinner at a steak house 
D) Gift purchased for a prospective customer $20) 
E) None of the above

Question 16

In his spare time,Fred likes to restore old furniture and sell it to his friends.He is a lawyer by trade.During 2013,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 17

The home office deduction is an easy way for a taxpayer to show a loss on his or her tax return.

Accepted Answer

A) True 
 B)False

Question 18

Taxpayers who use their country club more than 50 percent for business may deduct the total amount of their membership dues.

Accepted Answer

A) True 
 B)False

Question 19

Deductible transportation expenses:

Accepted Answer

A) Include meals and lodging. 
B) Include only costs incurred while away from home. 
C) Do not include the normal costs of commuting. 
D) Do not include daily expenses for transportation between the taxpayer's home and temporary work locations if the taxpayer has a regular place of business. 
A) Include meals and lodging. 
B) Include only costs incurred while away from home. 
C) Do not include the normal costs of commuting. 
D) Do not include daily expenses for transportation between the taxpayer's home and temporary work locations if the taxpayer has a regular place of business.

Question 20

Katie operates a ceramics studio from her garage.She incurs the following expenses:
 $\begin{array}{ll}
\text { Clay and paints } & \$ 3,500 \
\text { Painting technique seminars } & \$ 400 \
\text { Pottery wheel } & \$ 75 \
\text { Utilities for the ceramic studio } & \$ 375\
\text { Personal property taxes on ceramic equipment }&\$50
\end{array}$ Katie's gross receipts from her business were $2,000. 
a.If the studio is deemed to be a hobby,then calculate the amount of expenses Katie may deduct,and describe how she may report the income and expenses on her tax return.
b.If the studio is not a hobby,then calculate the amount of expenses Katie may deduct,and describe how she may report the income and expenses on her tax return.

Accepted Answer

a.If the business is deemed to be a hobb

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

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?

A taxpayer who adopts the LIFO method of inventory valuation for tax purposes may use the FIFO method for preparing financial statements.

Which of the following taxpayers may not use the standard mileage method of calculating transportation costs?

If a taxpayer takes a trip within the United States which is primarily for business,the cost of travel to and from the destination need not be prorated between the business and personal portion of the trip.

The cost of a subscription to the New England Journal of Medicine is a deductible expense for a hospital intern.

If the taxpayer does not maintain adequate records of the car expenses i.e. ,gas,tires,car insurance,etc. ),the standard mileage rate cannot be used.

The standard mileage rate for automobiles in 2013 is 56.5 cents per mile.

Which of the following expenses,incurred while on travel,does not qualify as 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 2013,he sells $500 worth of furniture and has $21,000 worth of expenses.Which one of the following is true?

The home office deduction is an easy way for a taxpayer to show a loss on his or her tax return.

Taxpayers who use their country club more than 50 percent for business may deduct the total amount of their membership dues.

Deductible transportation expenses:

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

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

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?

A taxpayer who adopts the LIFO method of inventory valuation for tax purposes may use the FIFO method for preparing financial statements.

Which of the following taxpayers may not use the standard mileage method of calculating transportation costs?

If a taxpayer takes a trip within the United States which is primarily for business,the cost of travel to and from the destination need not be prorated between the business and personal portion of the trip.

The cost of a subscription to the New England Journal of Medicine is a deductible expense for a hospital intern.

If the taxpayer does not maintain adequate records of the car expenses i.e. ,gas,tires,car insurance,etc. ),the standard mileage rate cannot be used.

The standard mileage rate for automobiles in 2013 is 56.5 cents per mile.

Which of the following expenses,incurred while on travel,does not qualify as 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 2013,he sells $500 worth of furniture and has $21,000 worth of expenses.Which one of the following is true?

The home office deduction is an easy way for a taxpayer to show a loss on his or her tax return.

Taxpayers who use their country club more than 50 percent for business may deduct the total amount of their membership dues.

Deductible transportation expenses:

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