Question 1

Which of the following is not a test to deduct business expenses:

Accepted Answer

A) ​The expense must be ordinary and necessary 
B) ​The expense must have a legitimate business purpose 
C) ​The expense must be reasonable 
D) ​The expense must be lavish and extravagant 
A) ​The expense must be ordinary and necessary 
B) ​The expense must have a legitimate business purpose 
C) ​The expense must be reasonable 
D) ​The expense must be lavish and extravagant

Question 2

Carol,a CPA,is always required by her employer to wear to work either a gray or a blue business suit with matching shoes.Carol would never consider wearing her gray or blue suits and matching shoes anywhere other than work since she considers them uncomfortable as well as unattractive.Can Carol deduct the cost of the suits and shoes as special work clothing or uniforms? Explain.

Accepted Answer

No.The suits and shoes can be

Question 3

A taxpayer who adopts the LIFO method of inventory valuation for tax purposes may use the FIFO method for preparing financial statements.

Accepted Answer

A) True 
 B)False

Question 4

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?

Accepted Answer

A) $0 
B) $175 
C) $200 
D) $350 
E) $800 
A) $0 
B) $175 
C) $200 
D) $350 
E) $800

Question 5

Schedule C or Schedule C-EZ may be used to report the net profit or loss from a partnership with business expenses of $2,500 or less.

Accepted Answer

A) True 
 B)False

Question 6

In the current year,Johnice started a profitable bookkeeping business as a sole proprietor.Johnice made $38,000 in her first year of operation.What two forms must Johnice file for her business?

Accepted Answer

A) Schedules A and C 
B) Schedules D and E 
C) Schedule SE and C 
D) Schedules B and C 
E) None of the above 
A) Schedules A and C 
B) Schedules D and E 
C) Schedule SE and C 
D) Schedules B and C 
E) None of the above

Question 7

Larry qualifies for a home office deduction.The amount of space devoted to the business is 500 square feet of the total 2,000 square feet in his house.Larry's total rent on the house is $7,000,and he pays utilities (other than telephone)of $4,500 for the year.Calculate Larry's deductions for home office expenses before the gross income limitation.
​
Rent expense
Utilities
Total home office expenses

Accepted Answer

The answer of Larry qualifies for a home office deduction.The...

Question 8

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 9

If an employee is transferred to a distant location for an indefinite period of time,the new location typically will be considered the employee's new tax home.

Accepted Answer

A) True 
 B)False

Question 10

Taxpayers who use their country club more than 50 percent for business may deduct the total amount of their membership dues.

Accepted Answer

A) True 
 B)False

Question 11

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.

Accepted Answer

The answer of Vinnie has a small retail store and...

Question 12

Which of the following factors are considered by the IRS in evaluating whether an activity is classified as a business or a hobby?

Accepted Answer

A) The expertise of the taxpayer 
B) The time and effort expended by the taxpayer 
C) Financial status of the taxpayer 
D) Income and loss history from the activity 
E) All of the above 
A) The expertise of the taxpayer 
B) The time and effort expended by the taxpayer 
C) Financial status of the taxpayer 
D) Income and loss history from the activity 
E) All of the above

Question 13

Richard operates a hair styling boutique out of his home.The boutique occupies 420 of the home's 1,200 square feet of floor space.Other information is as follows: What amount of income or loss from the boutique should Richard show on his return?

Accepted Answer

A) $0 income or loss 
B) $10,400 loss 
C) $3,500 income 
D) $1,300 income 
E) None of the above 
A) $0 income or loss 
B) $10,400 loss 
C) $3,500 income 
D) $1,300 income 
E) None of the above

Question 14

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?

Accepted Answer

A) $816 
B) $446 
C) $795 
D) $801 
E) None of the above 
A) $816 
B) $446 
C) $795 
D) $801 
E) None of the above

Question 15

Donald,a cash basis dentist,had $7,000 of uncollectible accounts receivable in 2017.Because Donald had always been a cash basis taxpayer,he had not reported the $7,000 in taxable income when the services were performed.
​
How much of the $7,000 bad debt can Donald take as a bad debt deduction on his 2017 tax return? Explain.

Accepted Answer

$0.Because the income from the

Question 16

Teachers at the kindergarten through high school level may deduct a maximum of $225 of education supplies and materials cost each year ($450 if married filing jointly and both spouses are educators).

Accepted Answer

A) True 
 B)False

Question 17

Karen has a net operating loss in 2017.If she does not make any special elections,what is the first year to which Karen can carry the net operating loss? ​

Accepted Answer

A) 2012 
B) 2013 
C) 2014 
D) 2015 
E) 2016 
A) 2012 
B) 2013 
C) 2014 
D) 2015 
E) 2016

Question 18

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

Accepted Answer

A) Tips 
B) Dry cleaning of suit 
C) Dinner at a steak house 
D) Gift purchased for a prospective customer ($20) 
E) None of the above 
A) Tips 
B) Dry cleaning of suit 
C) Dinner at a steak house 
D) Gift purchased for a prospective customer ($20) 
E) None of the above

Question 19

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? ​

Accepted Answer

A) Janine purchased more inventory during the year than she sold during the same one-year period. 
B) Janine would have a higher net income if she used the FIFO method of inventory valuation instead of the LIFO method. 
C) Janine has apparently increased the volume of items in her ending inventory as compared to the number of items in her beginning inventory. 
D) Since the cost of the store's inventory items is increasing,Janine will have a smaller cost of goods sold amount on a LIFO basis than on a FIFO basis. 
E) None of the above. 
A) Janine purchased more inventory during the year than she sold during the same one-year period. 
B) Janine would have a higher net income if she used the FIFO method of inventory valuation instead of the LIFO method. 
C) Janine has apparently increased the volume of items in her ending inventory as compared to the number of items in her beginning inventory. 
D) Since the cost of the store's inventory items is increasing,Janine will have a smaller cost of goods sold amount on a LIFO basis than on a FIFO basis. 
E) None of the above.

Question 20

Bobby is an accountant who uses a portion of his home as his office.His home is 2,500 square feet and his office space occupies 1,500 square feet.Rent expense is $18,000 a year;utilities expense is $2,000 a year;and maintenance expense is $3,000 a year.What is the total amount of these expenses that can be allocated to his home office?

Accepted Answer

A) $5,800 
B) $9,200 
C) $9,280 
D) $13,800 
E) $23,000 
A) $5,800 
B) $9,200 
C) $9,280 
D) $13,800 
E) $23,000

Which of the following is not a test to deduct business expenses:

A taxpayer who adopts the LIFO method of inventory valuation for tax purposes may use the FIFO method for preparing financial statements.

Schedule C or Schedule C-EZ may be used to report the net profit or loss from a partnership with business expenses of $2,500 or less.

In the current year,Johnice started a profitable bookkeeping business as a sole proprietor.Johnice made $38,000 in her first year of operation.What two forms must Johnice file for her business?

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.

If an employee is transferred to a distant location for an indefinite period of time,the new location typically will be considered the employee's new tax home.

Taxpayers who use their country club more than 50 percent for business may deduct the total amount of their membership dues.

Which of the following factors are considered by the IRS in evaluating whether an activity is classified as a business or a hobby?

Richard operates a hair styling boutique out of his home.The boutique occupies 420 of the home's 1,200 square feet of floor space.Other information is as follows: What amount of income or loss from the boutique should Richard show on his return?

Teachers at the kindergarten through high school level may deduct a maximum of $225 of education supplies and materials cost each year ($450 if married filing jointly and both spouses are educators).

Karen has a net operating loss in 2017.If she does not make any special elections,what is the first year to which Karen can carry the net operating loss?

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

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

Which of the following is not a test to deduct business expenses:

A taxpayer who adopts the LIFO method of inventory valuation for tax purposes may use the FIFO method for preparing financial statements.

Schedule C or Schedule C-EZ may be used to report the net profit or loss from a partnership with business expenses of $2,500 or less.

In the current year,Johnice started a profitable bookkeeping business as a sole proprietor.Johnice made $38,000 in her first year of operation.What two forms must Johnice file for her business?

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.

If an employee is transferred to a distant location for an indefinite period of time,the new location typically will be considered the employee's new tax home.

Taxpayers who use their country club more than 50 percent for business may deduct the total amount of their membership dues.

Which of the following factors are considered by the IRS in evaluating whether an activity is classified as a business or a hobby?

Richard operates a hair styling boutique out of his home.The boutique occupies 420 of the home's 1,200 square feet of floor space.Other information is as follows: What amount of income or loss from the boutique should Richard show on his return?

Teachers at the kindergarten through high school level may deduct a maximum of $225 of education supplies and materials cost each year ($450 if married filing jointly and both spouses are educators).

Karen has a net operating loss in 2017.If she does not make any special elections,what is the first year to which Karen can carry the net operating loss? ​

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

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

Karen has a net operating loss in 2017.If she does not make any special elections,what is the first year to which Karen can carry the net operating loss?