Question 1

Put T for Taxable income or N for Nontaxable income beside each item below as it normally would be treated for tax purposes.
-Carbon Corporation had a $2,000,000 contract to build a small hospital with total costs estimated at $1,600,000. It received the following payments and incurred the following expenses over the three-year contract period: Year Payments Expenses
1 $ 400,000 $300,000
2 $1,200,000 $900,000
3 $ 400,000 $550,000
Under the competed contract method of accounting, how much profit (loss) should Carbon recognize in years 1, 2, and 3 respectively?

Accepted Answer

A)  $0, $0, $250,000 
B)  $0, $0, $400,000 
C)  $100,000, $300,000, ($150,000) 
D)  $75,000, $225,000, ($50,000)

Question 2

Put T for Taxable income or N for Nontaxable income beside each item below as it normally would be treated for tax purposes.
-Cash dividend

Accepted Answer

The answer of Put T for Taxable income or N...

Question 3

The completed contract method allows the taxpayer to defer taxes on the contract income.

Accepted Answer

A) True 
 B)False

Question 4

All government bonds are exempt from the application of the OID rules.

Accepted Answer

A) True 
 B)False

Question 5

If a beneficiary of a life insurance policy receives the insurance proceeds over time in installments, then each installment received is fully taxable.

Accepted Answer

A) True 
 B)False

Question 6

Explain the basic difference between the common law and community property states related to earned income.

Accepted Answer

The answer of Explain the basic difference between the common...

Question 7

Put T for Taxable income or N for Nontaxable income beside each item below as it normally would be treated for tax purposes.
-Clayton Corporation receives $100,000 to provide garbage service for the next four years:

Accepted Answer

A)  Clayton must recognize income over the four years for both tax and accounting purposes. 
B)  Clayton can include the entire $100,000 in income currently for both tax and accounting purposes. 
C)  The $100,000 creates a permanent difference between tax and accounting income. 
D)  The $100,000 creates a timing difference between tax and accounting income.

Question 8

Which of the following types of income would a nonresident alien avoid paying tax on in the U.S.?

Accepted Answer

A)  U.S. business income 
B)  Non-U.S. business income 
C)  Interest on U.S. savings accounts 
D)  Dividends from U.S. corporations

Question 9

The completed contract method requires income to be recognized annually based on the costs incurred in that year.

Accepted Answer

A) True 
 B)False

Question 10

Put T for Taxable income or N for Nontaxable income beside each item below as it normally would be treated for tax purposes.
-Prior to the Tax Cuts and Jobs Act, foreign income of a controlled foreign corporation that has never paid a dividend.

Accepted Answer

The answer of Put T for Taxable income or N...

Question 11

Kayla receives an $18,500 scholarship from the state university. The university specifies that $8,500 is for tuition and books, while $10,000 is for room and board. In addition, Kayla works part-time at the campus library and earns $5,000. How much is Kayla required to include in her gross income?

Accepted Answer

A)  zero 
B)  $5,000 
C)  $15,000 
D)  $23,500

Question 12

Explain the two acceptable methods for recognizing income on long-term contracts.

Accepted Answer

The answer of Explain the two acceptable methods for recognizing...

Question 13

Put T for Taxable income or N for Nontaxable income beside each item below as it normally would be treated for tax purposes.
-Reimbursements from employer-financed medical plan for medical expenses

Accepted Answer

The answer of Put T for Taxable income or N...

Question 14

Qualified dividends are dividends that are eligible for the reduced tax rates for dividend income.

Accepted Answer

A) True 
 B)False

Question 15

Which of the following are included in gross income?

Accepted Answer

A)  Jury duty fees 
B)  Gambling winnings 
C)  Interest on federal tax refund 
D)  All are included in income

Question 16

Income of a nonresident alien cannot be taxed by the United States.

Accepted Answer

A) True 
 B)False

Question 17

Put T for Taxable income or N for Nontaxable income beside each item below as it normally would be treated for tax purposes.
-State tax refund of a nonitemzer.

Accepted Answer

The answer of Put T for Taxable income or N...

Question 18

What is the purpose of the original issue discount rules?

Accepted Answer

The answer of What is the purpose of the original...

Question 19

When is money received in the form of a scholarship included in income?

Accepted Answer

The answer of When is money received in the form...

Question 20

Under the source principle of international taxation, income will be taxed in a particular jurisdiction if the source of that income is a business operating in that jurisdiction.

Accepted Answer

A) True 
 B)False

Exam 3: Determining Gross Income

Put T for Taxable income or N for Nontaxable income beside each item below as it normally would be treated for tax purposes. -Cash dividend

The completed contract method allows the taxpayer to defer taxes on the contract income.

All government bonds are exempt from the application of the OID rules.

If a beneficiary of a life insurance policy receives the insurance proceeds over time in installments, then each installment received is fully taxable.

Explain the basic difference between the common law and community property states related to earned income.

Put T for Taxable income or N for Nontaxable income beside each item below as it normally would be treated for tax purposes. -Clayton Corporation receives $100,000 to provide garbage service for the next four years:

Which of the following types of income would a nonresident alien avoid paying tax on in the U.S.?

The completed contract method requires income to be recognized annually based on the costs incurred in that year.

Put T for Taxable income or N for Nontaxable income beside each item below as it normally would be treated for tax purposes. -Prior to the Tax Cuts and Jobs Act, foreign income of a controlled foreign corporation that has never paid a dividend.

Kayla receives an $18,500 scholarship from the state university. The university specifies that $8,500 is for tuition and books, while $10,000 is for room and board. In addition, Kayla works part-time at the campus library and earns $5,000. How much is Kayla required to include in her gross income?

Explain the two acceptable methods for recognizing income on long-term contracts.

Put T for Taxable income or N for Nontaxable income beside each item below as it normally would be treated for tax purposes. -Reimbursements from employer-financed medical plan for medical expenses

Qualified dividends are dividends that are eligible for the reduced tax rates for dividend income.

Which of the following are included in gross income?

Income of a nonresident alien cannot be taxed by the United States.

Put T for Taxable income or N for Nontaxable income beside each item below as it normally would be treated for tax purposes. -State tax refund of a nonitemzer.

What is the purpose of the original issue discount rules?

When is money received in the form of a scholarship included in income?

Under the source principle of international taxation, income will be taxed in a particular jurisdiction if the source of that income is a business operating in that jurisdiction.