Question 1

Which of the following is not an acceptable method of accounting under the tax law?

Accepted Answer

A) The accrual method 
B) The cash method 
C) The hybrid method 
D) All of the above are acceptable 
E) None of the above are acceptable 
A) The accrual method 
B) The cash method 
C) The hybrid method 
D) All of the above are acceptable 
E) None of the above are acceptable

Question 2

The maximum annual Section 179 immediate expensing deduction in 2016 is $500,000.​

Accepted Answer

A) True 
 B)False

Question 3

​An asset (not an automobile) placed in service in June 2016 has a depreciable basis of $2,035,000, a recovery period of 5 years, and is the only asset placed in service during the year. Assuming bonus depreciation is used, a half-year convention, and the expensing election is made for the maximum eligible amount, what is the amount of cost that can be deducted in 2016 assuming the business earned taxable income of $1,000,000 before deducting any cost recovery?

Accepted Answer

A) ​$407,000 
B) ​$500,000 
C) ​$1,000,000 
D) ​$1,407,000 
E) ​$2,000,000 
A) ​$407,000 
B) ​$500,000 
C) ​$1,000,000 
D) ​$1,407,000 
E) ​$2,000,000

Question 4

Quince Corporation changes its year-end from a fiscal year-end to a calendar year-end. The corporation has taxable income of $39,000 for its 3-month short period beginning October 1, 2016 and ending December 31, 2016. Calculate the corporation's tax for the short period.

Accepted Answer

$39,000 / 3 months × 12 months

Question 5

From the records of Tom, a cash basis sole proprietor, the following information was available: What amount should Tom report as net earnings from self-employment?

Accepted Answer

A) $10,900 
B) $11,300 
C) $11,400 
D) $14,400 
E) None of the above 
A) $10,900 
B) $11,300 
C) $11,400 
D) $14,400 
E) None of the above

Question 6

Bev is the sole owner of Bev & Associates, an accrual basis corporation. In 2016, Bev & Associates has a bad year and Bev lends the corporation $50,000 to meet expenses. The corporation accrues interest expense of $5,000 on the loan from Bev, but does not pay the interest to her in cash.
​
How much of the $5,000 in accrued interest expense can Bev & Associates deduct on its 2016 corporate tax return? Explain.

Accepted Answer

$0. Because Bev and Bev & Asso

Question 7

To be depreciated, must an asset actually lose value each year?

Accepted Answer

No. For tax purposes, the term depreciat

Question 8

On August 1, 2016, David purchased manufacturing equipment for use in his business. The equipment cost $14,000 and has an estimated useful life and MACRS class life of 7 years. No election to expense or use bonus depreciation is made.
a.​
Calculate the amount of depreciation on the manufacturing equipment for 2016 using the accelerated MACRS method and no election to expense or use bonus depreciation is made.
b.​
Calculate the amount of depreciation on the manufacturing equipment for 2016 using the accelerated MACRS method and bonus depreciation used but no election to expense.
c.Calculate the amount of depreciation on the manufacturing equipment for 2016 using the straight-line MACRS optional method and no election to expense or use bonus depreciation is made.
d.​
Calculate the amount of depreciation on the manufacturing equipment for 2016 for financial accounting purposes using the straight-line method of depreciation.

Accepted Answer

The answer of On August 1, 2016, David purchased manufacturing...

Question 9

Which one of the following is true about Modified Accelerated Cost Recovery System (MACRS)?

Accepted Answer

A) A building is depreciated using 200 percent declining balance depreciation. 
B) Buildings and autos both have the same depreciation life. 
C) A light duty business truck is depreciated using accelerated depreciation. 
D) All of the above are false. 
A) A building is depreciated using 200 percent declining balance depreciation. 
B) Buildings and autos both have the same depreciation life. 
C) A light duty business truck is depreciated using accelerated depreciation. 
D) All of the above are false.

Question 10

If a loss from sale or exchange of property between related parties is disallowed and the property is subsequently sold to an unrelated party,

Accepted Answer

A) An amended return may be filed to claim the loss previously disallowed. 
B) The unrelated party may claim the loss previously disallowed. 
C) The disallowed loss may be used to offset gain on the subsequent sale. 
D) The disallowed loss may be used if there is a further loss on the subsequent sale. 
E) The disallowed loss is lost forever. 
A) An amended return may be filed to claim the loss previously disallowed. 
B) The unrelated party may claim the loss previously disallowed. 
C) The disallowed loss may be used to offset gain on the subsequent sale. 
D) The disallowed loss may be used if there is a further loss on the subsequent sale. 
E) The disallowed loss is lost forever.

Question 11

Which one of the following may not be depreciated using an accelerated method?

Accepted Answer

A) A farming tractor 
B) A computer used strictly for the farming business 
C) A corn-husking machine 
D) A farm truck that is operated for personal use more than 50 percent of the time 
E) All of the above items may be depreciated using an accelerated method 
A) A farming tractor 
B) A computer used strictly for the farming business 
C) A corn-husking machine 
D) A farm truck that is operated for personal use more than 50 percent of the time 
E) All of the above items may be depreciated using an accelerated method

Question 12

Automobiles generally have a 3-year cost recovery period under the Modified Accelerated Cost Recovery System (MACRS).

Accepted Answer

A) True 
 B)False

Question 13

Most partnerships, S corporations, and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

Accepted Answer

A) True 
 B)False

Question 14

Which one of the following is a Section 197 intangible?

Accepted Answer

A) Computer software available for purchase by the general public 
B) A building 
C) A stock investment 
D) An interest-earning certificate of deposit 
E) Goodwill 
A) Computer software available for purchase by the general public 
B) A building 
C) A stock investment 
D) An interest-earning certificate of deposit 
E) Goodwill

Question 15

Cork Oak Corporation purchased a heavy-duty truck (not considered a passenger automobile for purposes of the listed property and luxury automobile limitations) on May 1, 2016 for use in its business. The truck, with a cost basis of $24,000, has a 5-year estimated life. It also is 5-year recovery property. How much depreciation should be taken on the truck for the 2016 calendar tax year using the conventional (for financial accounting purposes) straight-line depreciation method?

Accepted Answer

A) $400 
B) $2,400 
C) $3,200 
D) $4,800 
E) None of the above 
A) $400 
B) $2,400 
C) $3,200 
D) $4,800 
E) None of the above

Question 16

Jasper is a self-employed businessman. On March 5, 2016 he purchases a personal computer for use at his home. He uses the computer for personal purposes 50 percent of the time and for business use the remainder of the time. The computer cost $2,300. Jasper wants to claim the maximum amount of depreciation possible for 2016, including the election to expense, if it is available. What is the amount of depreciation that Jasper should claim on the computer for 2016?

Accepted Answer

A) $2,300 
B) $1,150 
C) $460 
D) $230 
E) Some amount less than the above amounts 
A) $2,300 
B) $1,150 
C) $460 
D) $230 
E) Some amount less than the above amounts

Question 17

An asset is placed in service on May 15, 2016 and has a depreciable basis of $40,000. The asset is in the 7-year recovery class and the half-year convention applies. What is the maximum depreciation deduction that may be claimed for 2016, excluding the election to expense and bonus depreciation?

Accepted Answer

A) $2,572 
B) $5,144 
C) $5,716 
D) $25,000 
E) None of the above 
A) $2,572 
B) $5,144 
C) $5,716 
D) $25,000 
E) None of the above

Question 18

​Max purchases a new auto in 2016 at a cost of $56,000. He uses the car 80% for business. Assuming a half-year convention, bonus depreciation but no immediate expensing, what is the depreciation deduction on the auto?

Accepted Answer

A) ​$0 
B) ​$8,928 
C) ​$8,960 
D) ​$28,000 
E) ​$33,600 
A) ​$0 
B) ​$8,928 
C) ​$8,960 
D) ​$28,000 
E) ​$33,600

Question 19

Steve Corp bought a $600,000 apartment building in June of 2015. Of the purchase price, $104,950 is allocated to the value of the land. What is the maximum amount of depreciation that the company can claim in 2016 (year 2) for the building?

Accepted Answer

A) $9,752 
B) $18,000 
C) $25,000 under the election to expense business property 
D) $21,816 
E) You cannot depreciate property costing over $500,000 
A) $9,752 
B) $18,000 
C) $25,000 under the election to expense business property 
D) $21,816 
E) You cannot depreciate property costing over $500,000

Question 20

​An asset (not an automobile) put in service in June 2016 has a depreciable basis of $535,000 and a recovery period of 5 years. Assuming bonus depreciation is used, a half-year convention, and no expensing election, what is the maximum amount of cost that can be deducted in 2016?

Accepted Answer

A) $107,000​ 
B) ​$267,500 
C) ​$321,000 
D) ​$374,500 
E) ​$535,000 
A) $107,000​ 
B) ​$267,500 
C) ​$321,000 
D) ​$374,500 
E) ​$535,000

Which of the following is not an acceptable method of accounting under the tax law?

The maximum annual Section 179 immediate expensing deduction in 2016 is $500,000.

Quince Corporation changes its year-end from a fiscal year-end to a calendar year-end. The corporation has taxable income of $39,000 for its 3-month short period beginning October 1, 2016 and ending December 31, 2016. Calculate the corporation's tax for the short period.

From the records of Tom, a cash basis sole proprietor, the following information was available: What amount should Tom report as net earnings from self-employment?

To be depreciated, must an asset actually lose value each year?

Which one of the following is true about Modified Accelerated Cost Recovery System (MACRS)?

If a loss from sale or exchange of property between related parties is disallowed and the property is subsequently sold to an unrelated party,

Which one of the following may not be depreciated using an accelerated method?

Automobiles generally have a 3-year cost recovery period under the Modified Accelerated Cost Recovery System (MACRS).

Most partnerships, S corporations, and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

Which one of the following is a Section 197 intangible?

An asset is placed in service on May 15, 2016 and has a depreciable basis of $40,000. The asset is in the 7-year recovery class and the half-year convention applies. What is the maximum depreciation deduction that may be claimed for 2016, excluding the election to expense and bonus depreciation?

Max purchases a new auto in 2016 at a cost of $56,000. He uses the car 80% for business. Assuming a half-year convention, bonus depreciation but no immediate expensing, what is the depreciation deduction on the auto?

Steve Corp bought a $600,000 apartment building in June of 2015. Of the purchase price, $104,950 is allocated to the value of the land. What is the maximum amount of depreciation that the company can claim in 2016 (year 2) for the building?

An asset (not an automobile) put in service in June 2016 has a depreciable basis of $535,000 and a recovery period of 5 years. Assuming bonus depreciation is used, a half-year convention, and no expensing election, what is the maximum amount of cost that can be deducted in 2016?

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part I

Business Income and Expenses Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

Exam 7: Accounting Periods and Methods and Depreciation

Which of the following is not an acceptable method of accounting under the tax law?

The maximum annual Section 179 immediate expensing deduction in 2016 is $500,000.​

Quince Corporation changes its year-end from a fiscal year-end to a calendar year-end. The corporation has taxable income of $39,000 for its 3-month short period beginning October 1, 2016 and ending December 31, 2016. Calculate the corporation's tax for the short period.

From the records of Tom, a cash basis sole proprietor, the following information was available: What amount should Tom report as net earnings from self-employment?

To be depreciated, must an asset actually lose value each year?

Which one of the following is true about Modified Accelerated Cost Recovery System (MACRS)?

If a loss from sale or exchange of property between related parties is disallowed and the property is subsequently sold to an unrelated party,

Which one of the following may not be depreciated using an accelerated method?

Automobiles generally have a 3-year cost recovery period under the Modified Accelerated Cost Recovery System (MACRS).

Most partnerships, S corporations, and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

Which one of the following is a Section 197 intangible?

An asset is placed in service on May 15, 2016 and has a depreciable basis of $40,000. The asset is in the 7-year recovery class and the half-year convention applies. What is the maximum depreciation deduction that may be claimed for 2016, excluding the election to expense and bonus depreciation?

​Max purchases a new auto in 2016 at a cost of $56,000. He uses the car 80% for business. Assuming a half-year convention, bonus depreciation but no immediate expensing, what is the depreciation deduction on the auto?

Steve Corp bought a $600,000 apartment building in June of 2015. Of the purchase price, $104,950 is allocated to the value of the land. What is the maximum amount of depreciation that the company can claim in 2016 (year 2) for the building?

​An asset (not an automobile) put in service in June 2016 has a depreciable basis of $535,000 and a recovery period of 5 years. Assuming bonus depreciation is used, a half-year convention, and no expensing election, what is the maximum amount of cost that can be deducted in 2016?

The Individual Income Tax Return

Gross Income and Exclusions

Business Income and Expenses Part I

Business Income and Expenses Part II

Itemized Deductions and Other Incentives

Credits and Special Taxes

Capital Gains and Losses

Withholding Estimated Payments and Payroll Taxes

Partnership Taxation

The Corporate Income Tax

Tax Administration and Tax Planning

Filters

The maximum annual Section 179 immediate expensing deduction in 2016 is $500,000.

Max purchases a new auto in 2016 at a cost of $56,000. He uses the car 80% for business. Assuming a half-year convention, bonus depreciation but no immediate expensing, what is the depreciation deduction on the auto?

An asset (not an automobile) put in service in June 2016 has a depreciable basis of $535,000 and a recovery period of 5 years. Assuming bonus depreciation is used, a half-year convention, and no expensing election, what is the maximum amount of cost that can be deducted in 2016?