Exam 6: Taxable Income From Business Operations

Tabco Inc.,a calendar year,accrual basis corporation,accrued $48,800 wage and salary expense and a corresponding liability at the end of 2019.How much of the accrued expense is deductible in 2019?

Eddy Corporation engaged in a transaction that generated $100,000 book income but only $81,000 taxable income.Which of the following is true?

Pim Inc.operates a business with a natural annual operating cycle ending August 31.Which of the following can Pim adopt as its taxable year?

Bolton Inc.,a calendar year taxpayer,generated a $296,400 net operating loss this year.Bolton can carry the loss back five years and forward 20 years for tax purposes.

Which of the following does not result in a permanent book/tax difference?

Tonto Inc.has used a calendar year as its taxable year since its incorporation in 1990.Tonto has an excellent business reason for changing to a fiscal year ending May 31.Which of the following statements is true?

Which of the following statements concerning the cash method of accounting is true?

Zephex is a calendar year corporation.On December 1,2019,Zephex received a $12,000 check from a tenant that leases office space owned by Zephex.This payment was rent for the four-month period from December 1,2019,through March 31,2020.On December 2,2019,Zephex billed a client $38,250 for services rendered to the client in November.The client did not pay the bill until January 14,2020. a.If Zephex is a cash basis taxpayer,how much 2019 income should it recognize with respect to the above transactions? b.If Zephex is an accrual basis taxpayer,how much 2019 book income should it report and how much 2019 taxable income should it recognize with respect to the above transactions?

Elcox Company,a calendar year,cash basis taxpayer,paid a $6,340 premium to purchase a casualty insurance policy with a 36-month term.Elcox can deduct $6,340 in the year of payment.

Southlawn Inc.'s taxable income is computed as follows: Using a 21% rate,compute Southlawn's tax expense per books and tax payable.

When an individual taxpayer begins a new business as a sole proprietorship and wants to keep records on a fiscal year basis,permission to change taxable years is not required because this is a new business.

For federal tax purposes,gross income from the sale of tangible goods is reduced by the seller's cost of goods sold.

Laine Services,a calendar year taxpayer,billed a client for $8,450 of services on November 30,2019,and received a check in full payment from the client on January 12,2020.If Poole is an accrual basis taxpayer,it reports $8,450 taxable income in 2019.

Taxpayers may adopt the cash receipts and disbursements method,the accrual method,or a hybrid method of accounting for tax purposes.

A permanent difference between book income and taxable income affects only one taxable year.

A firm's choice of taxable year is usually dictated by the annual operating cycle of the firm's business.

Which of the following statements about the constructive receipt doctrine is false?

Tax expense per books is based on:

At the end of its taxable year,Gong Company accrued an expense for an account payable to Mexance Inc.Even if Gong and Mexance are related parties,Gong can deduct the accrued expense if Mexance also uses the accrual method of accounting for tax purposes.

Stack Inc.owns a $1 million insurance policy on the life of Mary Stack,the corporate CEO.The corporation is the policy beneficiary.Stack's annual premium on the policy is $3,160.Which of the following statements is true?