Exam 3: Business Income and Expenses Part I

Acme Corporation had the following expenses: 1. 1,000 pads of paper embossed with the company logo to hand out at the Big Time Convention $ 700 2. Display racks to use at the convention center 200 3. An all-expense vacation for Susie's 25 years of service awarded under a qualified plan 2,500 4. A golden cone to recognize Wayne's on the job safety record 320 Acme has a qualified plan for the job awards. Calculate Acme's total deductions for the above expenses.

Carlos drives to Oregon to consult with a client. He works for 1 day and spends 3 days enjoying Oregon since the consultation was right before a 3-day weekend. His expenses were $175 to drive to Oregon and back, $600 for lodging, $50 for food on the day that he worked, and $125 for food on the other 3 days. How much of his travel expenses are deductible?

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.

Sue is a small business owner who often gives gifts to clients. She gives a $40 gift to her client, Mr. Smith, and his wife. Sue spent $6 to wrap the gift. She also gave out 400 calendars with her company name on them. Each calendar cost $1. Sue also gave her secretary a $370 watch for his 10 years of service. How much of the above expenses may she deduct?

What income tax form does a self-employed sole proprietor usually use to report business income and expense?

​Teachers at the kindergarten through high school level may deduct up to $225 of education supplies and materials cost each year ($400 married filing jointly).

Vinnie has a small retail store and sells one product. His beginning inventory consisted of 1,000 products at $4 each for a total of $4,000. During the year, Vinnie made the following purchases of the product: March 1 5,000 products at $5 each = $25,000 August 1 1,000 products at $6 each = $ 6,000 ​ Vinnie uses the FIFO method of inventory valuation and he sells 5,000 products during the current year. a.Calculate the total cost of goods available for sale. b.Calculate the cost of the ending inventory. c.Calculate the cost of goods sold.

Janine is a sole proprietor owning a small specialty store. The business records show that the cost of the store's individual inventory items has been steadily increasing. The cost of the end of the year inventory is $125,000 and the cost of the beginning of the year inventory was $150,000. Janine uses the LIFO method of inventory valuation. Which of the following statements is true? ​

Ruth is a self-employed surgeon and is required to take a week of continuing medical education every year to keep her license. This year she paid $2,000 in course fees for her continuing medical education in Honolulu. She also paid $1,500 for airfare and a hotel room and $400 for meals. What is the total amount she can deduct on her Schedule C related to these expenses?

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

What is the purpose of Schedule C?

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

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?

Indicate which of the following dues, subscriptions, and publications are deductible and which are not deductible: 1. Subscription to "The New England Journal of Medicine" for an electrician 2. Ford truck shop manual for an auto mechanic 3. Subscription to "Shape" magazine for an aerobics teacher 4. Dues for a hairstyle video club for a hairdresser 5. Movie of the Month club for an appraiser

Dennis, the owner of Dennis Company, incurs the following expenses while away from home on a 3-week business trip during 2016: In addition to the above expenses, Dennis incurred the following expenses for a weekend sightseeing trip to Washington D.C.: ​ Calculate the amount Dennis may deduct for 2016 as travel expenses for the trip. Calculate the amount Dennis may deduct for 2016 as entertainment. Calculate the amount Dennis may deduct for 2016 as business gifts.

Which of the following would be a business bad debt if it were uncollectible? ​

In his spare time, Fred likes to restore old furniture and sell it to his friends. He is a lawyer by trade. During 2016, he sells $500 worth of furniture and has $21,000 worth of expenses. Which one of the following is true?

​Sally is a high school math teacher. In 2016, she purchases $400 worth of supplies related to her teaching. Her spouse, Gabe, is a high school math teacher and spends $100 in education supplies for his classes. If married filing jointly, what is the 2016 for-AGI educator's expenses deduction?

Gary is a self-employed accountant who pays $2,000 for business meals. How much of a deduction can he claim for the meals and where should the deduction be claimed?

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?