Question 1

The standard mileage rate for automobiles in 2019 is 56 cents per mile.

Accepted Answer

A) True 
 B)False

Question 2

The expense of a sales luncheon may be deductible (50 percent in the current year) even if no sale is made.

Accepted Answer

A) True 
 B)False

Question 3

Candace uses an office in her home exclusively for her business. The business use of the home is 100 square feet out of 2,000 square feet for the entire home. The total expenses to allocate are $3,000. Candace wishes to maximize her deduction in the current year. What is the amount of her home office deduction before any income limitations?

Accepted Answer

$500. If Candace allocates the

Question 4

Anna is a self-employed newspaper columnist who does her work exclusively from a home office. Anna had a bad year and her taxable income from her business is only $2,000 before the home office expenses this year. Her office takes up 250 square feet of her 1,000 square feet apartment. The total expenses for her apartment are $8,000 for rent, $1,000 for utilities, $200 of renter's insurance, and $800 for pest control and other maintenance. What is Anna's home office deduction? Please show your calculations.

Accepted Answer

$2,000. The total costs of her apartment

Question 5

Barry is a self-employed attorney who travels to New York on a business trip during the year. Barry's expenses were as follows: $$\begin{array} { l r } 
\text { Airfare } & \$ 560 \
\text { Taxis } & 40 \
\text { Meals } & 100 \
\text { Lodging } & 350
\end{array}$$ How much may Barry deduct as travel expenses for the trip?

Accepted Answer

A) $0 
B) $950 
C) $1,000 
D) $1,050 
E) None of these 
A) $0 
B) $950 
C) $1,000 
D) $1,050 
E) None of these

Question 6

Jack is a lawyer who is a member at Ocean Spray Country Club where he spends $7,200 in dues, $4,000 in business meals, and $2,000 in green fees to entertain clients. He has separate invoices for the meals. He is also a member of the local Rotary club where he meets potential clients. The dues for the Rotary club are $1,200 a year. How much of the above expenses can Jack deduct as business expenses?

Accepted Answer

A) $4,200 
B) $3,200 
C) $7,200 
D) $14,400 
E) None of these 
A) $4,200 
B) $3,200 
C) $7,200 
D) $14,400 
E) None of these

Question 7

Martin has a home office for his business as an agent for rock-and-roll bands. The business shows a loss of $2,000 before home office expenses. How should the home office expenses be treated?

Accepted Answer

A) Because of the business loss, home office expenses cannot be deducted and are lost forever. 
B) Because of the business loss, home office expenses (other than mortgage interest and property taxes allocated to the office) cannot be deducted in the current year but can be carried forward to the next year. 
C) The home office expenses increase the business loss in the year they are incurred and are fully deductible in that year. 
D) The home office expenses increase the business loss in the year they are incurred and are 50 percent deductible in that year. 
A) Because of the business loss, home office expenses cannot be deducted and are lost forever. 
B) Because of the business loss, home office expenses (other than mortgage interest and property taxes allocated to the office) cannot be deducted in the current year but can be carried forward to the next year. 
C) The home office expenses increase the business loss in the year they are incurred and are fully deductible in that year. 
D) The home office expenses increase the business loss in the year they are incurred and are 50 percent deductible in that year.

Question 8

Acacia Company had inventory of $300,000 on December 31, 20X1. Other information is as follows: $$\begin{array} { | l | r | } 
\hline \text { Purchases } & \$ 1,500,000 \
\hline \text { Sales } & 1,800,000 \
\hline \text { Inventory 1/1/20X1 } & 500,000 \
\hline
\end{array}$$ What is the amount of Acacia's cost of goods sold for 20X1?

Accepted Answer

A) $2,000,000 
B) $1,600,000 
C) $1,700,000 
D) $1,800,000 
E) None of these 
A) $2,000,000 
B) $1,600,000 
C) $1,700,000 
D) $1,800,000 
E) None of these

Question 9

Which of the following items incurred while on travel is not considered a travel expense?

Accepted Answer

A) The cost of meals 
B) The cost of lodging 
C) Transportation costs 
D) Cost of entertaining clients 
E) None of these 
A) The cost of meals 
B) The cost of lodging 
C) Transportation costs 
D) Cost of entertaining clients 
E) None of these

Question 10

In determining whether an activity should be classified as a hobby, the tax law provides a rebuttable presumption with regard to the profits or losses of an activity. Which of the following statements describes the profit/loss test which must be satisfied in order to meet the presumption that the activity is not a hobby?

Accepted Answer

A) The activity shows a profit for 3 of the 5 previous years. 
B) The activity shows a loss for 3 of the 5 previous years. 
C) The activity shows a profit for 3 of the 7 previous years. 
D) The activity shows a loss for 3 of the 7 previous years. 
E) None of these 
A) The activity shows a profit for 3 of the 5 previous years. 
B) The activity shows a loss for 3 of the 5 previous years. 
C) The activity shows a profit for 3 of the 7 previous years. 
D) The activity shows a loss for 3 of the 7 previous years. 
E) None of these

Question 11

Which of the following is deductible as dues, subscriptions, or publications?

Accepted Answer

A) Dues to a health club for a doctor 
B) Subscription to "Vogue" magazine for a corporate president 
C) Dues to the drama club for a student 
D) Subscription to the "Journal of Taxation" for a tax attorney 
E) None of these 
A) Dues to a health club for a doctor 
B) Subscription to "Vogue" magazine for a corporate president 
C) Dues to the drama club for a student 
D) Subscription to the "Journal of Taxation" for a tax attorney 
E) None of these

Question 12

Under the specific charge-off method, a deduction for a bad debt is taken when the debt is determined to be worthless.

Accepted Answer

A) True 
 B)False

Question 13

In 2019, to report the net profit or loss from a partnership with business expenses of $2,500 or less, a taxpayer can use Schedule C-EZ.

Accepted Answer

A) True 
 B)False

Question 14

Katie operates a ceramics studio from her garage. She incurs the following expenses: $$\begin{array} { l r } 
\text { Clay and paints } & \$ 3,500 \
\text { Painting technique seminars } & 400 \
\text { Pottery wheel } & 75 \
\text { Utilities for the ceramic studio } & 375 \
\text { Personal property taxes on ceramic equipment } & 50
\end{array}$$ 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 hob

Question 15

Jasper owns a small retail store as a sole proprietor. The business records show that the cost of the store's inventory items has been steadily increasing. The cost of the end of the year inventory is $200,000 and the cost of the beginning of the year inventory was $250,000. Jasper uses the FIFO method of inventory valuation. Which of the following statements is true?

Accepted Answer

A) Jasper purchased more inventory during the year than he sold during the same one-year period. 
B) Jasper would have a higher net income if he used the LIFO method of inventory valuation instead of the FIFO method. 
C) Jasper has apparently decreased the volume of items in his ending inventory as compared to the number of items in his beginning inventory. 
D) Since the cost of the store's inventory items is increasing, Jasper will have a greater cost of goods sold figure under FIFO than LIFO. 
E) None of these 
A) Jasper purchased more inventory during the year than he sold during the same one-year period. 
B) Jasper would have a higher net income if he used the LIFO method of inventory valuation instead of the FIFO method. 
C) Jasper has apparently decreased the volume of items in his ending inventory as compared to the number of items in his beginning inventory. 
D) Since the cost of the store's inventory items is increasing, Jasper will have a greater cost of goods sold figure under FIFO than LIFO. 
E) None of these

Question 16

Dennis, the owner of Dennis Company, incurs the following expenses while away from home on a 3-week business trip during 2019: $\begin{array} { l  }
 \text { Airfare from Chicago to Boston}&\$800 \
 \text { Hotel charges}&1,800 \
 \text { Meal charges}&740 \
 \text { Dry cleaning and laundry}&100 \
 \text {Local transportation }&40 \
 \text { Business entertainment}&150 \
 \text {Business gift to Boston customer }&45 \
\end{array}$
 In addition to the above expenses, Dennis incurred the following expenses for a weekend sightseeing trip to Washington D.C.: $\begin{array} { l  }
 \text { Transportation to Washington D.C.}&\$200 \
 \text { Hotel charges}&125 \
 \text { Meal charges}&95 \
\end{array}$
 Calculate the amount Dennis may deduct for 2019 as travel expenses for the trip.
Calculate the amount Dennis may deduct for 2019 as entertainment.
Calculate the amount Dennis may deduct for 2019 as business gifts.

Accepted Answer

The answer of Dennis, the owner of Dennis Company, incurs...

Question 17

Once a taxpayer uses the standard mileage method to determine the deduction for automobile expenses for the tax year, the standard mileage method must be used in all subsequent years.
​

Accepted Answer

A) True 
 B)False

Question 18

Marco makes the following business gifts during the year: $\begin{array}{ll}
\text { Miss Scarlett (a potential client) } & \$ 30 \
\text { Mr. and Mrs. White (both are dients) } & \$ 40 \
\text { Professor Plum (a dient) } & \$ 18 \
\text { Mrs. Pum (the nonclient wife of Frofessor Plum) } & \$ 12 \
\text { Charles Mustard (Marco's boss) } & \$ 27
\end{array}$ Marco also spent $15 on wrapping paper and a card for the above gift to the Whites.
Calculate Marco's total allowed deduction for gifts

Accepted Answer

The answer of Marco makes the following business gifts during...

Question 19

If a taxpayer works at two or more jobs during the same day, he or she may deduct the cost of transportation from one job to the other.

Accepted Answer

A) True 
 B)False

Question 20

During the current year, Harry, a self-employed accountant, travels from Kansas City to Miami for a seven-day business trip. While in Miami, Harry decides to stay for an additional 5 days of vacation. Harry pays $600 for airfare, $200 for meals, and $500 for lodging while on business. The cost of meals and lodging while on vacation was $300 and $500, respectively. How much may Harry deduct as travel expenses for the trip?

Accepted Answer

A) $600 
B) $1,100 
C) $1,200 
D) $1,300 
E) None of these 
A) $600 
B) $1,100 
C) $1,200 
D) $1,300 
E) None of these

The standard mileage rate for automobiles in 2019 is 56 cents per mile.

The expense of a sales luncheon may be deductible (50 percent in the current year) even if no sale is made.

Barry is a self-employed attorney who travels to New York on a business trip during the year. Barry's expenses were as follows: Airfare \ 560 Taxis 40 Meals 100 Lodging 350 How much may Barry deduct as travel expenses for the trip?

Martin has a home office for his business as an agent for rock-and-roll bands. The business shows a loss of $2,000 before home office expenses. How should the home office expenses be treated?

Acacia Company had inventory of $300,000 on December 31, 20X1. Other information is as follows: Purchases \ 1,500,000 Sales 1,800,000 Inventory 1/1/20X1 500,000 What is the amount of Acacia's cost of goods sold for 20X1?

Which of the following items incurred while on travel is not considered a travel expense?

Which of the following is deductible as dues, subscriptions, or publications?

Under the specific charge-off method, a deduction for a bad debt is taken when the debt is determined to be worthless.

In 2019, to report the net profit or loss from a partnership with business expenses of $2,500 or less, a taxpayer can use Schedule C-EZ.

Once a taxpayer uses the standard mileage method to determine the deduction for automobile expenses for the tax year, the standard mileage method must be used in all subsequent years.

If a taxpayer works at two or more jobs during the same day, he or she may deduct the cost of transportation from one job to the other.

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income and the Qualified Business Income Deduction

Deductions for and From AGI

Accounting Periods and Other Taxes

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments and Retirement Plans

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 3: Business Income and Expenses

The standard mileage rate for automobiles in 2019 is 56 cents per mile.

The expense of a sales luncheon may be deductible (50 percent in the current year) even if no sale is made.

Barry is a self-employed attorney who travels to New York on a business trip during the year. Barry's expenses were as follows: Airfare \ 560 Taxis 40 Meals 100 Lodging 350 How much may Barry deduct as travel expenses for the trip?

Martin has a home office for his business as an agent for rock-and-roll bands. The business shows a loss of $2,000 before home office expenses. How should the home office expenses be treated?

Acacia Company had inventory of $300,000 on December 31, 20X1. Other information is as follows: Purchases \ 1,500,000 Sales 1,800,000 Inventory 1/1/20X1 500,000 What is the amount of Acacia's cost of goods sold for 20X1?

Which of the following items incurred while on travel is not considered a travel expense?

Which of the following is deductible as dues, subscriptions, or publications?

Under the specific charge-off method, a deduction for a bad debt is taken when the debt is determined to be worthless.

In 2019, to report the net profit or loss from a partnership with business expenses of $2,500 or less, a taxpayer can use Schedule C-EZ.

Once a taxpayer uses the standard mileage method to determine the deduction for automobile expenses for the tax year, the standard mileage method must be used in all subsequent years. ​

If a taxpayer works at two or more jobs during the same day, he or she may deduct the cost of transportation from one job to the other.

The Individual Income Tax Return

Gross Income and Exclusions

Additional Income and the Qualified Business Income Deduction

Deductions for and From AGI

Accounting Periods and Other Taxes

Tax Credits

Depreciation and Sale of Business Property

Payroll, Estimated Payments and Retirement Plans

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Once a taxpayer uses the standard mileage method to determine the deduction for automobile expenses for the tax year, the standard mileage method must be used in all subsequent years.