Question 1

The taxpayer must use either the FIFO or LIFO method of valuing inventory,depending upon which method reflects the actual goods the taxpayer has on hand.

Accepted Answer

A) True 
 B)False  False

Question 2

Greg,a self-employed plumber,commutes from his home to his office which is 10 miles away.At his office,he loads his truck for the day with the parts that he needs.Then he is off to see his first customer of the day,Mr.Smith.Mr.Smith is 5 miles away from the office.After Mr.Smith's job,Greg goes to his next plumbing client,Martin's Dry Cleaning,which is 21 miles away from Mr.Smith.Greg spends the rest of the day at Martin's Dry Cleaning.From Martin's Dry Cleaning,Greg goes home which is now only 7 miles away.How much can Greg count as deductible transportation miles? ​

Accepted Answer

A) None of it 
B) 21 miles 
C) 26 miles 
D) 43 miles 
A) None of it 
B) 21 miles 
C) 26 miles 
D) 43 miles C

Question 3

Peter operates a dental office in his home.The office occupies 250 square feet of his residence,which is a total of 1,500 square feet.During 2017,Peter pays rent for his home of $12,000,utilities of $4,800,and maintenance expenses of $1,200.What amount of the total expenses should be allocated to the home office?

Accepted Answer

A) $0 
B) $2,000 
C) $2,500 
D) $3,000 
E) None of the above 
A) $0 
B) $2,000 
C) $2,500 
D) $3,000 
E) None of the above D

Question 4

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

Accepted Answer

A) A taxpayer loans his father $1,000 to start a business. 
B) A taxpayer loans his son $10,000 to purchase a rental house. 
C) A dentist,using the accrual basis of accounting,records income when it is earned and extends credit to a patient for services provided. 
D) A taxpayer loans his brother $3,000 to purchase a truck for use in his brother's business. 
E) None of the above. 
A) A taxpayer loans his father $1,000 to start a business. 
B) A taxpayer loans his son $10,000 to purchase a rental house. 
C) A dentist,using the accrual basis of accounting,records income when it is earned and extends credit to a patient for services provided. 
D) A taxpayer loans his brother $3,000 to purchase a truck for use in his brother's business. 
E) None of the above.

Question 5

Curt is self-employed as a real estate salesman and drives his car frequently to take clients to see homes for sale.Curt drove his car 20,000 miles for business purposes and 25,000 miles in total.His actual expenses for operating the auto including depreciation are $10,000 since he drove it so much during the year.Curt has used the actual cost method since he started his business in 2014.How much is Curt's deductible auto expense for the year?

Accepted Answer

$8,000 (20,000 / 25,000 miles

Question 6

A business gift with a value of $35 presented to a client and his non-client spouse is fully deductible by the donor.

Accepted Answer

A) True 
 B)False

Question 7

During the current year,Harry,a self-employed accountant,travels from Kansas City to Miami for a 1-week 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 the above 
A) $600 
B) $1,100 
C) $1,200 
D) $1,300 
E) None of the above

Question 8

When a taxpayer uses the FIFO inventory valuation method,the assumption on which the method is based is that the inventory on hand at the end of the year consists of the most recently acquired items.

Accepted Answer

A) True 
 B)False

Question 9

Wanda is a single taxpayer and an elementary school teacher.She also tutors students in her home as a small business.During 2017,Wanda purchased $300 in school supplies for her classroom.She also purchased $400 in supplies and materials for her tutoring business.Lastly,she uses a 200 square foot spare bedroom in her house to tutor her clients.Occasionally,her mother also stays in that room during holidays.If Wanda elects to use the simplified method for her home office and the educator's expense is extended for 2017,what are her deductions based on the information provided (ignore any income limitations)?

Accepted Answer

$650.Wanda may deduct $250 (2017 limit)a

Question 10

In his spare time,Fred likes to restore old furniture and sell it to his friends.He is a lawyer by trade.During 2017,he sells $500 worth of furniture and has $21,000 worth of expenses.Which one of the following is true?

Accepted Answer

A) Fred may deduct all $21,000 of his expenses because Fred is engaged in a hobby. 
B) Fred may deduct all $21,000 of his expenses because Fred is engaged in a trade or business. 
C) Fred cannot deduct any of the expenses because he is engaged in a hobby. 
D) Fred's deductions are limited to the income from selling furniture because he is engaged in a hobby. 
E) None of the above. 
A) Fred may deduct all $21,000 of his expenses because Fred is engaged in a hobby. 
B) Fred may deduct all $21,000 of his expenses because Fred is engaged in a trade or business. 
C) Fred cannot deduct any of the expenses because he is engaged in a hobby. 
D) Fred's deductions are limited to the income from selling furniture because he is engaged in a hobby. 
E) None of the above.

Question 11

Peter is a self-employed attorney.He gives the following information about his business to his CPA for use in preparing his 2017 tax return:
Peter also drove his car 5,579 miles for business and used the standard mileage method for computing transportation costs.How much will Peter show on his Schedule C for 2017 for:
   
a.Income
b.Tax deductible expenses
c.Taxable income

Accepted Answer

The answer of Peter is a self-employed attorney.He gives the...

Question 12

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

Accepted Answer

A) Schedule A,Miscellaneous Itemized Deductions 
B) Schedule B 
C) Schedule C 
D) Form 2106,Employee Business Expenses 
E) None of the above 
A) Schedule A,Miscellaneous Itemized Deductions 
B) Schedule B 
C) Schedule C 
D) Form 2106,Employee Business Expenses 
E) None of the above

Question 13

Stone Pine Corporation,a calendar year taxpayer,has ending inventory of $150,000 on December 31,20X2.During the year 20X2,the corporation purchased additional inventory of $375,000.If cost of goods sold for 20X2 is $470,000,what was the beginning inventory at January 1,20X2? ​

Accepted Answer

A) $55,000 
B) $245,000 
C) $255,000 
D) $310,000 
E) None of the above 
A) $55,000 
B) $245,000 
C) $255,000 
D) $310,000 
E) None of the above

Question 14

Which of the following taxpayers may not use the standard mileage method of calculating transportation costs?

Accepted Answer

A) A self-employed CPA who drives a computer-equipped minivan to visit clients. 
B) A taxpayer who has a fleet of 10 business automobiles. 
C) A real estate salesperson who drives a $70,000 Mercedes while showing houses. 
D) An attorney who uses his Yaris for calling on clients. 
E) All of the above taxpayers may use the standard mileage method. 
A) A self-employed CPA who drives a computer-equipped minivan to visit clients. 
B) A taxpayer who has a fleet of 10 business automobiles. 
C) A real estate salesperson who drives a $70,000 Mercedes while showing houses. 
D) An attorney who uses his Yaris for calling on clients. 
E) All of the above taxpayers may use the standard mileage method.

Question 15

Deductible transportation expenses:

Accepted Answer

A) Include meals and lodging. 
B) Include only costs incurred while away from home. 
C) Do not include the normal costs of commuting. 
D) Do not include daily expenses for transportation between the taxpayer's home and temporary work locations if the taxpayer has a regular place of business. 
A) Include meals and lodging. 
B) Include only costs incurred while away from home. 
C) Do not include the normal costs of commuting. 
D) Do not include daily expenses for transportation between the taxpayer's home and temporary work locations if the taxpayer has a regular place of business.

Question 16

Natasha is a self-employed private language tutor.In 2017,she obtained her teaching credentials,hoping to receive a job as a seventh grade public school English teacher.She had the following education expenses for the year:
Natasha also attended a seminar in Washington,D.C. ,titled "The Motivated Student." Her expenses for the trip are as follows:
   Determine how much of the above expenses are deductible on her Schedule C.

Accepted Answer

The travel expenses are deductible on he

Question 17

Karen was ill for most of the current year.She received tax-free disability income that covered most of her expenses.She paid the deductible expense of owning her home,interest on the mortgage,and property taxes out of this income.Her tax return shows negative taxable income of $25,000.Can this loss be carried back to prior years or carried forward to future years? Why or why not?

Accepted Answer

Karen's loss may not be carried to previ

Question 18

Sally is a high school math teacher.In 2017,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 2017 for-AGI educator's expenses deduction?

Accepted Answer

A) $0 
B) $250 
C) $350 
D) $500 
E) None of the above 
A) $0 
B) $250 
C) $350 
D) $500 
E) None of the above

Question 19

Kendra is a self-employed taxpayer working exclusively from her home office.Before the home office deduction,Kendra has $6,000 of net income.Her allocable home expenses are $10,000 in total.How are the home office expenses treated on her current year tax return?

Accepted Answer

A) Only $6,000 home office expenses may be deducted,resulting in net business income of zero.The remaining $4,000 of home office expenses may be carried forward and deducted in a future year against business income. 
B) Only $3,000 a year of the home office expenses may be deducted. 
C) All home office expenses may be deducted,resulting in a business loss of $4,000. 
D) Only $6,000 of home office expenses may be deducted,resulting in a net business income of zero.None of the remaining $4,000 of home office expenses may be carried forward or deducted. 
A) Only $6,000 home office expenses may be deducted,resulting in net business income of zero.The remaining $4,000 of home office expenses may be carried forward and deducted in a future year against business income. 
B) Only $3,000 a year of the home office expenses may be deducted. 
C) All home office expenses may be deducted,resulting in a business loss of $4,000. 
D) Only $6,000 of home office expenses may be deducted,resulting in a net business income of zero.None of the remaining $4,000 of home office expenses may be carried forward or deducted.

Question 20

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

The taxpayer must use either the FIFO or LIFO method of valuing inventory,depending upon which method reflects the actual goods the taxpayer has on hand.

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

A business gift with a value of $35 presented to a client and his non-client spouse is fully deductible by the donor.

When a taxpayer uses the FIFO inventory valuation method,the assumption on which the method is based is that the inventory on hand at the end of the year consists of the most recently acquired items.

In his spare time,Fred likes to restore old furniture and sell it to his friends.He is a lawyer by trade.During 2017,he sells $500 worth of furniture and has $21,000 worth of expenses.Which one of the following is true?

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

Stone Pine Corporation,a calendar year taxpayer,has ending inventory of $150,000 on December 31,20X2.During the year 20X2,the corporation purchased additional inventory of $375,000.If cost of goods sold for 20X2 is $470,000,what was the beginning inventory at January 1,20X2?

Which of the following taxpayers may not use the standard mileage method of calculating transportation costs?

Deductible transportation expenses:

Sally is a high school math teacher.In 2017,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 2017 for-AGI educator's expenses deduction?

Kendra is a self-employed taxpayer working exclusively from her home office.Before the home office deduction,Kendra has $6,000 of net income.Her allocable home expenses are $10,000 in total.How are the home office expenses treated on her current year tax return?

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

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 3: Business Income and Expenses Part I

The taxpayer must use either the FIFO or LIFO method of valuing inventory,depending upon which method reflects the actual goods the taxpayer has on hand.

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

A business gift with a value of $35 presented to a client and his non-client spouse is fully deductible by the donor.

When a taxpayer uses the FIFO inventory valuation method,the assumption on which the method is based is that the inventory on hand at the end of the year consists of the most recently acquired items.

In his spare time,Fred likes to restore old furniture and sell it to his friends.He is a lawyer by trade.During 2017,he sells $500 worth of furniture and has $21,000 worth of expenses.Which one of the following is true?

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

Stone Pine Corporation,a calendar year taxpayer,has ending inventory of $150,000 on December 31,20X2.During the year 20X2,the corporation purchased additional inventory of $375,000.If cost of goods sold for 20X2 is $470,000,what was the beginning inventory at January 1,20X2? ​

Which of the following taxpayers may not use the standard mileage method of calculating transportation costs?

Deductible transportation expenses:

Sally is a high school math teacher.In 2017,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 2017 for-AGI educator's expenses deduction?

Kendra is a self-employed taxpayer working exclusively from her home office.Before the home office deduction,Kendra has $6,000 of net income.Her allocable home expenses are $10,000 in total.How are the home office expenses treated on her current year tax return?

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

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Accounting Periods and Methods and Depreciation

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

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

Stone Pine Corporation,a calendar year taxpayer,has ending inventory of $150,000 on December 31,20X2.During the year 20X2,the corporation purchased additional inventory of $375,000.If cost of goods sold for 20X2 is $470,000,what was the beginning inventory at January 1,20X2?