Exam 11: Accounting Periods and Methods

If Jett Corporation receives a charter in 2015 but does not begin operations and file its first tax return until 2017,Jett may elect a fiscal year on the 2017 return.

Advance approval and the filing of Form 970 is required whenever a taxpayer adopts LIFO.

Emma,a single taxpayer,obtains permission to change from a calendar year to a fiscal year ending June 30,2017.During the six months ending June 30,2017,she earns $40,000 and has $8,000 of itemized deductions.What is the amount of her annualized income?

The installment method may be used for sales of all kinds of property with the exception of

Vector Corporation has been using an incorrect method in accounting for supplies expense.It can change to the correct method without filing 3115.

Generally,an income tax return covers an accounting period of 12 months.

On June 11,two years ago,Gia sold land with a cost of $15,000 for $45,000.Gia collected $20,000 initially and is scheduled to receive $5,000 each year for five years starting last year plus an acceptable rate of interest.This year,Gia decided to sell one installment note to a bank that agreed to pay $4,100.As a result of the sale of the note,Gia must report

On September 2,of this year,Keshawn sold land to Rex,his nephew,for $400,000.Keshawn's basis in the land was $100,000.Rex agreed to pay his uncle $40,000 this year,and $60,000 each year for the next six years plus interest.One month later,Rex sold the land to Theo,an unrelated party,for $450,000.Based on this information,Keshawn must report

In year 1 a contractor agrees to build a building for $2,500,000 by the end of year 2.The builder's cost is estimated to be $1,800,000.The actual costs year 1 are $900,000 and year 2's actual costs are $1,300,000.Under the completed contract method the gross profit for year 2 is

Marissa sold stock of a non-publicly traded corporation with an adjusted basis of $36,000 for $48,000.Marissa received a down payment of $12,000 with the balance due in equal payments over the next two years. a.What is the amount of gross profit to be recognized in the year of sale? b.Assume that the buyer defaulted on the final payment.Marissa sued and was able to repossess the stock.The fair market value of the stock on the date of repossession is $36,000; legal fees were $1,500.What is the gain or loss on the repossession?

Points paid on a mortgage to buy a personal residence are deductible in the year paid.

The installment sale method can be used for all of the following transactions except

The all-events test requires that the accrual-basis taxpayer report income when all events have occurred that fix the taxpayer's right to the income and when the amount can be determined with reasonable accuracy.

A partnership must generally use the same tax year of the partners who own the majority of partnership income and capital.

Bergeron is a local manufacturer of off-shore drilling platforms.This year,Bergeron entered into a contract to construct a drilling platform,which will be placed in the North Atlantic Ocean.The total contract price is $5,000,000,and Bergeron estimates the total construction cost at $2,000,000.Actual costs incurred this year are $600,000.If Bergeron uses the completed contract method,the gross profit for this year is

Sela sold a machine for $140,000.The machine originally cost $90,000 and $10,000 of MACRS depreciation had been allowable.The buyer assumed an existing loan of $40,000,paid $20,000 cash down and agreed to pay $10,000 per year for eight years plus interest.Selling expenses are $10,000.The total gross profit for installment sale recognition purposes is

In year 1 a contractor agrees to build a building for $2,500,000 by the end of year 2.The builder's cost is estimated to be $1,800,000.The actual costs year 1 are $900,000 and year 2's actual costs are $1,100,000.Under the percentage of completion method year 1's gross profit is

A cash-basis lawyer purchases an office building to use in her legal practice.To acquire the mortgage,the taxpayer must pay $5,000 in points.The taxpayer will deduct the points in the year paid.

In 2017,Richard's Department Store changes its inventory method from FIFO to LIFO.Richard's uses the simplified LIFO method.Richard's year-end inventory under FIFO is as follows: 2016 - $300,000; 2017 - $350,000.The 2016 price index is 110% and the 2017 index is 120%.The 2017 layer is

The installment method is not applicable to sales of inventory and marketable securities.