Question 1

The principle of conservatism reflected by GAAP is identical to the principle of conservatism reflected in the tax law.

Accepted Answer

A) True 
 B)False

Question 2

Hitz Company,a calendar year,accrual basis taxpayer,recorded $1,735 accrued interest expense and $1,735 accrued interest payable when it closed its books on December 31.The interest relates to a loan from First State Bank and accrued over the last two months of the year.Which of the following statements is true?

Accepted Answer

A) Hitz can't deduct the accrued interest expense until the year of payment. 
B) Hitz can deduct the accrued interest expense this year only if it pays the interest within eight and one-half months after the close of the year. 
C) Hitz can deduct the accrued interest expense this year. 
D) Hitz can never deduct the interest expense. 
A) Hitz can't deduct the accrued interest expense until the year of payment. 
B) Hitz can deduct the accrued interest expense this year only if it pays the interest within eight and one-half months after the close of the year. 
C) Hitz can deduct the accrued interest expense this year. 
D) Hitz can never deduct the interest expense.

Question 3

Jackey Company,a calendar year,accrual basis taxpayer,did not pay the $44,200 December rent on its commercial office space until January 8.As result,Jackey's accountant made a routine year-end accrual of $44,200 rent expense.Which of the following statements is true?

Accepted Answer

A) Jackey can deduct the $44,200 accrued rent expense. 
B) Jackey can deduct the $44,200 expense in the year of payment. 
C) The accrued rent expense results in a permanent book/tax difference. 
D) The accrued rent expense results in a temporary book/tax difference. 
A) Jackey can deduct the $44,200 accrued rent expense. 
B) Jackey can deduct the $44,200 expense in the year of payment. 
C) The accrued rent expense results in a permanent book/tax difference. 
D) The accrued rent expense results in a temporary book/tax difference.

Question 4

On December 12,2019,Hook Company,a calendar year,cash basis business,mailed a $5,600 bill to Mrs.Gilder for professional services rendered during the month of November.Mrs.Gilder dropped off her $5,600 check at Hook's office on December 28,but the company secretary did not deposit the check in Hook's bank account until January 3.Which of the following statements is true?

Accepted Answer

A) According to the constructive receipt doctrine,Hook must recognize $5,600 income in 2019. 
B) According to the substance over form doctrine,Hook does not recognize $5,600 income until 2020. 
C) As a cash basis taxpayer,Hook does not recognize $5,600 income until 2020. 
D) As a cash basis taxpayer,Hook can elect to recognize $5,600 income in either 2019 or 2020. 
A) According to the constructive receipt doctrine,Hook must recognize $5,600 income in 2019. 
B) According to the substance over form doctrine,Hook does not recognize $5,600 income until 2020. 
C) As a cash basis taxpayer,Hook does not recognize $5,600 income until 2020. 
D) As a cash basis taxpayer,Hook can elect to recognize $5,600 income in either 2019 or 2020.

Question 5

The tax law does not allows deductions based on estimated expenses that result in an allowance or reserve for financial statement purposes.

Accepted Answer

A) True 
 B)False

Question 6

Toro Inc.has average gross receipts of $30 million annually.This year,Toro incurred $5 million of net business interest and has adjusted taxable income of $12 million.Toro's current deduction for business interest is:

Accepted Answer

A) $1.5 million 
B) $3.6 million 
C) $5 million 
D) $0 
A) $1.5 million 
B) $3.6 million 
C) $5 million 
D) $0

Question 7

Village Inc.has average gross receipts of $100 million annually.This year,Village incurred $25 million of net business interest and has adjusted taxable income of $42 million.Village's current deduction for business interest is:

Accepted Answer

A) $0 
B) $7.5 million 
C) $12.6 million 
D) $25 million 
A) $0 
B) $7.5 million 
C) $12.6 million 
D) $25 million

Question 8

Marchal Inc.,a calendar year,accrual basis taxpayer,made the following state income tax payments during 2019.
   On December 28,Marchal's tax department calculated that the corporation's actual 2019 state income tax liability was $67,140.Consequently,Marchal accrued a $6,140 liability for state income tax payable at year end.
a.Compute Marchal's 2019 state income tax expense per books.
b.If Marchal has not adopted the recurring item exception as its method of accounting for state income taxes,compute Marchal's 2019 federal deduction for state income tax.

Accepted Answer

a.Marchal's state income tax e

Question 9

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

Accepted Answer

A) Tax expense per books $229,767; tax payable $229,767. 
B) Tax expense per books $329,559; tax payable $329,559. 
C) Tax expense per books $213,402; tax payable $229,767. 
D) Tax expense per books $229,767; tax payable $329,559. 
A) Tax expense per books $229,767; tax payable $229,767. 
B) Tax expense per books $329,559; tax payable $329,559. 
C) Tax expense per books $213,402; tax payable $229,767. 
D) Tax expense per books $229,767; tax payable $329,559.

Question 10

The after-tax cost of a dollar of business meal expense is 79 cents for a taxpayer with a 21% marginal tax rate.

Accepted Answer

A) True 
 B)False

Question 11

Which of the following statements about tax expense per books and tax payable is false?

Accepted Answer

A) If a corporation has no temporary differences between book income and taxable income,tax expense per books equals tax payable. 
B) If a corporation has no permanent differences between book income and taxable income,tax expense per books equals tax payable. 
C) Tax expense per books and tax payable are calculated from the same rate schedule. 
D) If a corporation has no permanent differences between book income and taxable income,tax expense per books equals tax payable and tax expense per books and tax payable are calculated from the same rate schedule. 
A) If a corporation has no temporary differences between book income and taxable income,tax expense per books equals tax payable. 
B) If a corporation has no permanent differences between book income and taxable income,tax expense per books equals tax payable. 
C) Tax expense per books and tax payable are calculated from the same rate schedule. 
D) If a corporation has no permanent differences between book income and taxable income,tax expense per books equals tax payable and tax expense per books and tax payable are calculated from the same rate schedule.

Question 12

Huml Inc.could not deduct an accrued expense because of the all-events test.As a result,Huml has a permanent unfavorable book/tax difference.

Accepted Answer

A) True 
 B)False

Question 13

Which of the following statements about the all-events test is false?

Accepted Answer

A) An accrued expense is not deductible unless the liability for the expense is fixed. 
B) An accrued expense is not deductible unless the amount of the expense is determinable with reasonable accuracy. 
C) An accrued expense is not deductible unless economic performance with respect to the liability has occurred. 
D) None of the above is false. 
A) An accrued expense is not deductible unless the liability for the expense is fixed. 
B) An accrued expense is not deductible unless the amount of the expense is determinable with reasonable accuracy. 
C) An accrued expense is not deductible unless economic performance with respect to the liability has occurred. 
D) None of the above is false.

Question 14

Which of the following statements about methods of accounting is false?

Accepted Answer

A) The IRS has the right to determine if a taxpayer's method of accounting clearly reflects the taxpayer's income. 
B) A taxpayer must request permission from the IRS to change its method of accounting for tax purposes. 
C) A taxpayer engaged in more than one business can use a different method of accounting for each business. 
D) Taxpayers must use the same method of accounting to compute taxable income as they use to compute financial statement income. 
A) The IRS has the right to determine if a taxpayer's method of accounting clearly reflects the taxpayer's income. 
B) A taxpayer must request permission from the IRS to change its method of accounting for tax purposes. 
C) A taxpayer engaged in more than one business can use a different method of accounting for each business. 
D) Taxpayers must use the same method of accounting to compute taxable income as they use to compute financial statement income.

Question 15

On December 19,2019,Logo Inc.,an accrual basis corporation,accrued $50,000 compensation expense for a routine year-end bonus payable to Mr.Craig,who is Logo's CFO.Logo paid the $50,000 to Mr.Craig on April 25,2020.Which of the following statements is true?

Accepted Answer

A) If Mr.Craig and Logo are not related parties,Logo can deduct the accrued expense in 2019. 
B) If Mr.Craig and Logo are related parties,Mr.Craig must include his $50,000 bonus in 2019 gross income. 
C) Regardless of whether Logo and Mr.Craig are related parties,Logo can't deduct the accrued compensation expense in 2019. 
D) If Mr.Craig and Logo are not related parties,Mr.Craig can elect to include the $50,000 bonus in gross income in either 2019 or 2020. 
A) If Mr.Craig and Logo are not related parties,Logo can deduct the accrued expense in 2019. 
B) If Mr.Craig and Logo are related parties,Mr.Craig must include his $50,000 bonus in 2019 gross income. 
C) Regardless of whether Logo and Mr.Craig are related parties,Logo can't deduct the accrued compensation expense in 2019. 
D) If Mr.Craig and Logo are not related parties,Mr.Craig can elect to include the $50,000 bonus in gross income in either 2019 or 2020.

The principle of conservatism reflected by GAAP is identical to the principle of conservatism reflected in the tax law.

Jackey Company,a calendar year,accrual basis taxpayer,did not pay the $44,200 December rent on its commercial office space until January 8.As result,Jackey's accountant made a routine year-end accrual of $44,200 rent expense.Which of the following statements is true?

The tax law does not allows deductions based on estimated expenses that result in an allowance or reserve for financial statement purposes.

Toro Inc.has average gross receipts of $30 million annually.This year,Toro incurred $5 million of net business interest and has adjusted taxable income of $12 million.Toro's current deduction for business interest is:

Village Inc.has average gross receipts of $100 million annually.This year,Village incurred $25 million of net business interest and has adjusted taxable income of $42 million.Village's current deduction for business interest is:

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

The after-tax cost of a dollar of business meal expense is 79 cents for a taxpayer with a 21% marginal tax rate.

Which of the following statements about tax expense per books and tax payable is false?

Huml Inc.could not deduct an accrued expense because of the all-events test.As a result,Huml has a permanent unfavorable book/tax difference.

Which of the following statements about the all-events test is false?

Which of the following statements about methods of accounting is false?

On December 19,2019,Logo Inc.,an accrual basis corporation,accrued $50,000 compensation expense for a routine year-end bonus payable to Mr.Craig,who is Logo's CFO.Logo paid the $50,000 to Mr.Craig on April 25,2020.Which of the following statements is true?

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters

Exam 6: Taxable Income From Business Operations

The principle of conservatism reflected by GAAP is identical to the principle of conservatism reflected in the tax law.

Jackey Company,a calendar year,accrual basis taxpayer,did not pay the $44,200 December rent on its commercial office space until January 8.As result,Jackey's accountant made a routine year-end accrual of $44,200 rent expense.Which of the following statements is true?

The tax law does not allows deductions based on estimated expenses that result in an allowance or reserve for financial statement purposes.

Toro Inc.has average gross receipts of $30 million annually.This year,Toro incurred $5 million of net business interest and has adjusted taxable income of $12 million.Toro's current deduction for business interest is:

Village Inc.has average gross receipts of $100 million annually.This year,Village incurred $25 million of net business interest and has adjusted taxable income of $42 million.Village's current deduction for business interest is:

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

The after-tax cost of a dollar of business meal expense is 79 cents for a taxpayer with a 21% marginal tax rate.

Which of the following statements about tax expense per books and tax payable is false?

Huml Inc.could not deduct an accrued expense because of the all-events test.As a result,Huml has a permanent unfavorable book/tax difference.

Which of the following statements about the all-events test is false?

Which of the following statements about methods of accounting is false?

On December 19,2019,Logo Inc.,an accrual basis corporation,accrued $50,000 compensation expense for a routine year-end bonus payable to Mr.Craig,who is Logo's CFO.Logo paid the $50,000 to Mr.Craig on April 25,2020.Which of the following statements is true?

Taxes and Taxing Jurisdictions

Policy Standards for a Good Tax

Taxes As Transaction Costs

Maxims of Income Tax Planning

Tax Research

Property Acquisitions and Cost Recovery Deductions

Property Dispositions

Nontaxable Exchanges

Sole Proprietorships, partnerships, llcs, and S Corporations

The Corporate Taxpayer

The Choice of Business Entity

Jurisdictional Issues in Business Taxation

The Individual Tax Formula

Compensation and Retirement Planning

Investment and Personal Financial Planning

Tax Consequences of Personal Activities

The Tax Compliance Process

Filters