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Kaplan University acc507 All 6 Units Quiz




Question;1. Question: What is a corporation's alternative minimum tax rate?;Student Answer: 15%;20%;26%;28%;2. Question: Which of the following business entities does not file a;separate tax return to report business operations?;Student Answer: Sole proprietorship;S corporation;C corporation;Partnership;3. Question: Hoku Corporation (a C corporation) had the following;history of income and loss;Year Income (Loss);2009 $40,000;2010 $70,000;2011 ($10,000);How much of a tax refund can Hoku Corporation receive by;carrying back its 2011 loss?;Student Answer: $1,500;$2,500;$3,500;None, it cannot carry its loss back;4. Question: Which of these persons never pays taxes directly?;Student Answer: Individual;Partnership;C corporation;Fiduciary;5. Question: Which of the following is not a characteristic of an S;corporation?;Student Answer: Owners have;limited liability;The corporation is taxed directly on operating;income;The corporation can have no more than 100;shareholders;Shareholders must consent to the S election by;the corporation;6. Question: The Mercury Corporation must decide whether to invest in;some new machinery for its business. Which tax rate is the most relevant for;making this decision?;Student Answer: The average tax;rate;The marginal tax rate;The nominal tax rate;The effective tax rate;7. Question: What is the gain or loss on the sale of an asset for;$68,000 if the asset cost $185,000, depreciation expense deducted was $124,000;repair costs were $12,000, and there was a $19,000 major addition to the asset?;Student Answer: $0;$12,000 loss;$7,000 gain;$24,000 loss;UNIT ? 2;1. All of the following are part of the tax research process;except: (Points: 1);Establish the;facts;Locate;relevant authority;Identify the;issues;Communicate;the findings;All are part;of the tax research process;2. CK Corporation can invest $100,000 in a project. After;taxes, the project is expected to generate $40,000 of net income the first year;and $75,000 of net income the second year. If the company uses a 10 percent;discount rate to evaluate projects, what is the project's net cash flow?;(Points: 1);$15,000;$1,690;($1,690);($1,315);3. Changing which of the following factors as indicated;would decrease the after-tax net cash flow of a project: (Points: 1);Delaying the;years in which inflows occur;Delaying;revenue recognition;Increasing the;discount rate;All decrease;cash flows;None decrease;cash flows;4. What effect does an increased discount rate have on;project evaluations? (Points: 1);Increases net;cash flow;Decreases net;cash flow;Increases the;probability that a project will be accepted;It has no;effect on project evaluation;5. Which of the following does not deal with a CPA's;standard of conduct (Points: 1);Treasury;Circular 230;AICPA Code of;Conduct;Internal;Revenue Service Manual;Statement of;Standards for Tax Services;6. Which of the following explain why it is important to;determine the period in which income is recognized? (Points: 1);Marginal tax;rates may be different in different periods.;Tax laws may;change;The time value;of money;All of the;above are explanations;a. and b. only;are explanations;7. All of the following are allowable tax years except;(Points: 1);The last;Friday of July;December 31;The Sunday;closest to March 1;August 31;8. All of the following are acceptable methods of accounting;for revenue and expenses for tax purposes except: (Points: 1);Cash method;Accrual method;Percentage-of-completion;Hybrid method;All are;acceptable methods;9. Which of the following is an application of the;wherewithal-to-pay concept? (Points: 1);Percentage-of-completion;Hybrid method;of accounting;Installment;method;Accrual method;of accounting;10. Windjammer Corporation, a cash-basis, calendar-year;corporation sold $30,000 of merchandise to Jackpot Company in January, year 1.;In November, Jackpot declared bankruptcy without paying Windjammer. In year 4;Jackpot had reorganized under a new owner and paid all its old debts including;the $30,000 owed Windjammer. How does Windjammer treat these events? (Points;1);Recognize;$30,000 revenue in year 1 only.;Recognize;$30,000 revenue in year 4 only.;Deduct $30,000;as a bad debt in year 1.;Deduct $30,000;as a bad debt in year 1, recognize $30,000 income in year 4.;UNIT-3;1. Which of the following is included as part of APB 23?;(Points;5);A parent;corporation can exclude a foreign subsidiary?s income if earnings will not be;repatriated.;A parent;corporation can exclude deferred taxes on foreign income if earnings will not;be repatriated.;A parent must;meet a more-likely-than not standard to determine the effect of a tax benefit.;A parent must;disclose details relating to tax uncertainties of its subsidiaries.;2. If an expense is reported on the tax return before it is;reported on the financial accounting books;(Points;5);the result is;a deferred tax asset;the result is;a deferred tax liability;there could be;either a deferred tax asset or liability;there is no;effect as this is not a timing difference;3. The more-likely-than-not standard (Points: 5);is based on a;more-than 50 percent probability.;applies only to contested liabilities;is used to;determine if a deferred tax liability should be recognized.;is spelled out;in APB 23.;4. Waldo bought two tickets for a Packers game on Ebay for;$400. The tickets had a face value of $50 each. He took a client to the game;and they had a dinner afterwards where they discussed business. The cost of the;dinner was $70. What is Waldo?s deduction for these expenses? (Points: 5);$470;$235;$170;$85;5. What is the purpose of a per diem allowance? (Points: 5);Eliminate the;substantiation requirement for business expenses.;Reduce the;amount an employer must reimburse for employee business expenses.;Eliminate;paper work for certain employee business expenses.;Reduce;reimbursement disagreements between employer and employee.;6. Which of the following is a working condition fringe;benefit? (Points: 5);Flowers for an;ill employee;A holiday;cocktail party;A subscription;to a professional journal;A bus pass;7. Howard is a cash-basis, calendar-year taxpayer. He works;for Clyde Corporation, an accrual-basis, calendar-year corporation. Clyde;authorizes a $10,000 bonus for Howard on December 20, year 1. It pays the bonus;on March 31 of year 2. Which of the following is correct? (Points: 5);Howard;recognizes income in year 1 and Clyde takes a deduction in year 1.;Howard;recognizes income in year 1 and Clyde takes a deduction in year 2.;Howard;recognizes income in year 2 and Clyde takes a deduction in year 1.;Howard;recognizes income in year 2 and Clyde takes a deduction in year 2.;Unit-4;1. The adjusted basis of an asset is: (Points: 5);Its;acquisition price only;Acquisition;cost less cost recovery;Acquisition;cost less selling price;Only the cash;used to purchase the asset;2. Momee Corporation, a calendar-year corporation, bought;only one asset in 2006, a crane it purchased for $700,000 on November 24. It;disposed of the asset in April, 2011. What is its depreciation deduction for;this asset in 2011 if cost recovery was determined using only regular MACRS?;(Points;5);$62,510;$61,110;$31,255;$22,916;3. Coley Corporation has an $800 net short-term capital loss;and a $6,000 net long-term capital gain in the current year. It also has an;$8,000 long-term capital loss carryover from the prior year. What is Coley?s;capital loss carryover to the next year? (Points: 5);$0;$2,000;$2,800;$8,800;4. Alpha Corporation had income from operations of $30,000.;What is the corporation?s taxable income including the following property;transactions: Gain on investment stock = $8,000, loss on machinery held three;years = $6,000, $4,000 loss on equipment held 10 months, $4,000 gain on land;used for six years for storage of trucks. (Points: 5);$25,000;$27,000;$30,000;$32,000;5. All of the following are characteristics of percentage;depletion except;(Points;5);Depletion is;determined using a statutory percentage times gross income.;Percentage;depletion can exceed the property?s cost.;Depletion in;excess of cost results in a negative basis for property.;Is an;investment incentive provision.;6. Angel sells the following depreciable assets from her;sole proprietorship;Asset Cost Age;Gain/Loss;Office furniture $10,0004 years ($2,400);Truck $20,0005 years 3,100;Bakery equipment $25,0009 months (4,500);What should Angel report on her income tax return relative;to these property transactions? (Points: 5);$3,800 capital;loss;$3,100 Section;1245 recapture, $2,400 Section 1231 loss, $4,500 ordinary loss;$3,800;ordinary loss;$700 Section;1231 gain, $4,500 ordinary loss;None of the;above;7. Jack did not depreciate one of his machines that cost;$40,000 because he had net operating losses for the last two years. Which of;the following statements is true?;(Points;5);Jack?s basis;in the asset is $40,000 this year.;Jack can;deduct three year?s depreciation in the current year.;Jack must file;amended returns to claim the depreciation for prior years.;If Jack sells;the machine for $20,000 this year, he has a $20,000 loss.;Unit-5;1. Trudi Corporation has a building that it needs to sell or;exchange because of growth in its business. If Trudi sells the building, it;will have a gain of $450,000. What is the amount of taxes that Trudi will avoid;paying if it can exchange the building? The corporation has $1,000,000 of;taxable income from operations for the current year. (Points: 1);$90,000;$153,000;$175,500;$450,000;None of the;above;2. In early 2011, Conrad Corporation discovered their;bookkeeper had embezzled $30,000 over the last three years at a rate of;approximately $10,000 per year. Conrad also suffered uninsured hurricane damage;of $40,000 late in 2011 in a presidentially declared disaster area. If Conrad;wants to deduct its losses at the earliest time possible, what are the amounts;and year(s) of its loss deduction? (Points: 1);2011 = $70,000;2010 = $30,000;2010 = $40,000;2010 =;$40,000, 2011 = $30,000;2009 =;$10,000, 2010 = $10,000, 2011 = $50,000;None of the;above;3. Sam's land was condemned for a sewage treatment plant. He;received $600,000 for the land that had a basis of $650,000. What is his;realized and recognized gain or loss, respectively, on this involuntary;conversion? (Points: 1);($50,000);($50,000);($50,000), 0;$50,000;$50,000;0, 0;None of the;above;4. Which of the following is not a characteristic of;involuntary conversions? (Points: 1);Gain only is;deferred;The taxpayer;can receive cash to invest in qualifying replacement property;The provision;applies to both realty and personalty;All of these;are characteristics;None of these;are characteristics;5. The taxpayer-use test for qualifying replacement property;(Points: 1);applies only;to personalty;requires;replacement property used by the taxpayer to be used in the same business as;the converted property;only requires;leased realty to be replaced with other leased realty;Is more;restrictive than the functional-use test;6. Which of the following would be an indication that;corporate debt is disguised equity? (Points: 1);Debt is issued;to the shareholders in the same proportion as stock;The debt has a;specified maturity date;The debt has a;specified interest rate;Interest is;paid annually;None of the;above;7. A corporation that owns 72 percent of all the outstanding;stock of another corporation: (Points: 1);May not file a;consolidate return;May file a;consolidated return;May take a 100;percent dividend received deduction;May take a 70;percent dividend received deduction;Is the parent;of the 72 percent-owned company;8. A clothing manufacturing corporation donates last year's;inventory to the Red Cross for use in its disaster relief efforts. The clothes;have a fair market value of $200,000 and a basis to the corporation of $75,000.;What is its charitable contribution deduction? (Points: 1);$200,000;$150,000;$137,500;$75,000;9. A corporation has pre-tax book income of $324,000. In;determining this income, the corporation included $2,000 of tax-exempt;interest, $6,000 of dividends from an affiliated corporation, a capital loss of;$50,000 and $3,000 of excess book depreciation. What is the corporation?s;taxable income? (Points: 1);$369,000;$328,000;$269,000;$263,000;10. The Willow Corporation reported $400,000 of taxable;income. In making a conversion to book income, the accountant had to adjust for;the following: a $25,000 Section 179 deduction, but book depreciation would;have been $5,000, a fine of $12,500 for overweight trucks, and a net capital;loss of $10,000. What is Willow Corporation?s book income? (Points: 1);$422,500;$412,500;$402,500;$397,500;None of the;above;UNIT-6;1. John has $120,000 of net income from his sole;proprietorship in 2011. What is his deduction for AGI for self-employment;taxes? (Points: 1);$8,478;$9,180;$4,239;$0;2. James owns 60% of the James and Peter Partnership. The;partnership reports $300,000 of construction revenue, $120,000 of construction;expenses, and $80,000 of other expenses that include $4,000 of doctor expenses;paid for James, and a $6,000 charitable contribution. What is the bottom line;net income reported on Jame's Schedule K-1? (Points: 1);$100,000;$104,000;$106,000;$110,000;3. Mary has $30,000 of passive losses, $25,000 of passive;gains, $27,000 of active income and $24,000 of active losses during the year.;What is Mary's current year net taxable income or loss? (Points: 1);$2,000 loss;$0;$3,000 income;$5,000 income;4. Will and Grace are equal partners in Will and Grace;Partnership. Grace is employed full-time and receives a guaranteed salary from;the partnership of $60,000 annually. If there is profit remaining after that;salary, Will receives an allowance of $5,000 for his excess partner capital;balance. Any remainder is divided equally among Will and Grace. If the;accounting income before either of these payments is $80,000, what is the;amount of income or loss allocated to Grace? (Points: 1);$60,000;$67,500;$12,500;$5,000;5. Which of the following is not a requirement to make an S;election? (Points: 1);Minimum of 2;shareholders;Maximum of 100;shareholders;One class of;shareholders;d.It must be a domestic corporation;6. Karen has a $30,000 basis in her 40% ownership in an S;Corporation and lent the corporation $10,000 last year. The corporation has;other debt outstanding of $60,000 during the entire year. This year the S;Corporation reported a $200,000 loss. How much of this loss may Karen deduct? (Points;1);$0;$80,000;$24,000;$40,000;7. Williams Company is a S Corporation owned equally by;Smith and Weston. Williams had taxable income of $60,000 for the current;taxable year. Smith and Weston received distribution during the tax year of;$20,000 each. What is Smith's taxable income from Williams Company for the;current taxableyear? (Points: 1);$0;$20,000;$30,000;d.$50,000;8. Joy purchased a 50% interest in an S corporation on April;1 of the current year and sells one-half of her interest on October 1. If the S;corporation reported $40,000 of income for the year, what income does it report;on Joy's Schedule K-1? (Points: 1);$20,000;$15,000;$12,548;$10,000;9. Samantha and Ashley form the MAS General Partnership.;Samantha contributed $20,000 cash in exchange for her 50 percent partnership;interest. During the first year of partnership operations, the partnership;reported net taxable income of $10,000, Samantha withdrew $8,000 cash from the;partnership, and the partnership took out an $18,000 loan on the last day of;the year. Samantha's adjusted basis for her partnership interest at year end;is: (Points: 1);$38,000;$30,000;$26,000;$25,000;$20,000;$17,000;10. Which of the following is not a characteristic of sole;proprietorships? (Points: 1);Owners pay;self-employment taxes;Formation is;always tax-free;Distributions;of entity income are tax-free;Loss is;recognized on liquidation


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