ACC
307 Midterm Exam 100% Correct Answers
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ACC 307 Midterm Exam 100% Correct
Answers
Question 1
A characteristic of FUTA is that:
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Question 2
Which of the following statements
best describes the history of the Federal income tax?
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Question 3
Taxes not imposed by the Federal government
include:
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Question 4
A VAT (value added tax):
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Question 5
Which of the following transactions
will decrease a taxing jurisdiction’s ad valorem tax revenue imposed on real
estate?
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Question 6
In 2013, Cindy had the following
transactions:
Salary $90,000
Short-term capital gain from a stock
investment
4,000
Moving expense to change
jobs (11,000)
Received repayment of $20,000 loan
she made to her sister in 2009 (includes no interest) 20,000
State income
taxes (5,000)
Cindy’s AGI is:
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Question 7
Millie, age 80, is supported during
the current year as follows:
Percent of Support
Weston (a son) 20%
Faith (a
daughter) 35%
Jake (a cousin) 25%
Brayden (unrelated close family
friend) 20%
During the year, Millie lives in an
assisted living facility. Under a multiple support agreement, indicate which
parties can qualify to claim Millie as a dependent.
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Question 8
Which of the following is a deduction
for AGI?
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Question 9
Emily, whose husband died in
December 2012, maintains a household in which her dependent mother lives. Which
(if any) of the following is her filing status for the tax year 2013? (Note:
Emily is the executor of her husband’s estate.)
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Question 10
Which of the following items is
deductible?
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Question 11
Our tax laws encourage taxpayers to
____ assets that have appreciated in value and ____ assets that have declined
in value.
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Question 12
Harry and Wanda were married in
Texas, a community property state, but moved to Virginia, a common law
state. The calculation of their income on a joint return:
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Question 13
Sarah, a majority shareholder in
Teal, Inc., made a $200,000 interest-free loan to the corporation. Sarah is not
an employee of the corporation.
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Question 14
The purpose of the tax rules that
apply to below-market loans between family members is to:
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Question 15
Margaret owns land that appreciates
at the rate of 10% each year. Ralph owns a zero coupon (i.e., all of the
interest is paid at maturity but is taxed annually) corporate bond with a yield
to maturity of 10%. At the end of 10 years, the bond will mature and the land
will be sold. At the end of the 10 years,
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Question 16
The exclusion of interest on
educational savings bonds:
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Question 17
Employees of the Valley Country Club
are allowed to use the golf course without charge before and after working
hours on Mondays, when the number of players on the course is at its lowest.
Tom, an employee of the country club played 40 rounds of golf during the year
at no charge when the non-employee charge was $20 per round.
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Question 18
The Royal Motor Company manufactures
automobiles. Employees of the company can buy a new automobile for Royal’s cost
plus 2%. The automobiles are sold to dealers at cost plus 20%. Generally,
employees of Local Dealer, Inc., are allowed to buy a new automobile from the
company at the dealer’s cost. Officers of Local Dealer are allowed to use a
company vehicle (for personal use) at no cost.
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Question 19
Jena is a full-time undergraduate
student at State University and is claimed by her parents as a dependent. Her
only source of income is a $10,000 athletic scholarship ($1,000 for books,
$5,500 tuition, $500 student activity fee, and $3,000 room and board). Jena’s
gross income for the year is:
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Question 20
Olaf was injured in an automobile
accident and received $25,000 for his physical injury, $50,000 for his loss of
income, and $10,000 punitive damages. As a result of the award, the amount Olaf
must include in gross income is:
ACC 307 Midterm Exam Set 2
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Question 1
In January, Lance sold stock with a
cost basis of $26,000 to his brother, James, for $24,000, the fair market value
of the stock on the date of sale. Five months later, James sold the same stock
through his broker for $27,000. What is the tax effect of these transactions?
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Question 2
Tommy, an automobile mechanic
employed by an auto dealership, is considering opening a fast food franchise.
If Tommy decides not to acquire the fast food franchise, any investigation
expenses are:
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Question 3
Payments by a cash basis taxpayer of
capital expenditures:
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Question 4
Which of the following is not
deductible?
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Question 5
Velma and Bud divorced.
Velma’s attorney fee of $5,000 is allocated as follows:
General representation in obtaining
the divorce $1,500
Services in obtaining custody of the
child 900
Services in settlement of martial
property 600
Determining the tax consequences of:
Dependency deduction for
child
700
Property
settlement 1,300
Of the $5,000 Velma pays to her
attorney, the amount she may deduct as an itemized deduction is:
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Question 6
Five years ago, Tom loaned his son
John $20,000 to start a business. A note was executed with an interest rate of
8%, which is the Federal rate. The note required monthly payments of the
interest with the $20,000 due at the end of ten years. John always made the
interest payments until last year. During the current year, John notified his
father that he was bankrupt and would not be able to repay the $20,000 or the
accrued interest of $1,800. Tom is an accrual basis taxpayer whose only income
is salary and interest income. The proper treatment for the nonpayment of the
note is:
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Question 7
Jed is an electrician. Jed and
his wife are accrual basis taxpayers and file a joint return. Jed wired a
new house for Alison and billed her $15,000. Alison paid Jed $10,000 and
refused to pay the remainder of the bill, claiming the fee to be
exorbitant. Jed took Alison to Small Claims Court for the unpaid amount
and was awarded a $2,000 judgement. Jed was able to collect the judgement
but not the remainder of the bill from Alison. What amount of loss may
Jed deduct in the current year?
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Question 8
Norm’s car, which he uses 100% for
personal purposes, was completely destroyed in an accident in 2013. The car’s
adjusted basis at the time of the accident was $13,000. Its fair market value
was $10,000. The car was covered by a $2,000 deductible insurance policy. Norm
did not file a claim against the insurance policy because of a fear that
reporting the accident would result in a substantial increase in his insurance
rates. His adjusted gross income was $14,000 (before considering the loss).
What is Norm’s deductible loss?
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Question 9
Which of the following events would
produce a deductible loss?
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Question 10
Ivory, Inc., has taxable income of
$600,000 and qualified production activities income (QPAI) of $700,000 in 2013.
Ivory’s domestic production activities deduction is:
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Question 11
Bhaskar purchased a new factory
building on September 10, 2013, for $3,700,000. Five hundred thousand of the
purchase price was allocated to the land. He elected the alternative
depreciation system (ADS). Determine the cost recovery deduction for
2014.
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Question 12
Howard’s business is raising and
harvesting peaches. On March 10, 2013, Howard purchased 10,000 new peach trees
at a cost of $60,000. Howard does not elect to expense assets under § 179. If
eligible, Howard takes additional first-year depreciation. Determine the
cost recovery deduction for 2013.
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Question 13
James purchased a new business asset
(three-year property) on July 23, 2013, at a cost of $40,000. James takes
additional first-year depreciation. Determine the cost recovery deduction
for
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Question 14
Alice purchased office furniture on
September 20, 2012, for $100,000. On October 10, 2012, she purchased business
computers for $80,000. Alice placed all of the assets in service on January 15,
2013. Alice did not elect to expense any of the assets under § 179, nor did she
elect straight-line cost recovery. She did not take additional first-year
depreciation. Determine the cost recovery deduction for the business
assets for 2013.
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Question 15
Diane purchased a factory building
on April 15, 1993, for $5,000,000. She sells the factory building on February
2, 2013. Determine the cost recovery deduction for the year of the sale.