DEVRY ACCT224 WEEK 6 and week 7 homework es

Week 6

(TCO 9) Which of the following is NOT a realization event for tax purposes?

Chad found $500 in the street.

Justin traded a baseball card worth $100 for stock certificates.

John sold his a bond worth $10,000.

Jacob sold 100 shares of Google stock. (General Feedback:

Chapter 6, page 129. Realization occurs when the earnings process for goods and services is complete, regardless of when payment is received.)

Comments:

Question 2. Question : (TCO 9) In which of these cases is the realization principle applied differently for tax purposes if the taxpayer is cash basis rather than accrual basis?

The taxpayer receives January salary income in December.

The taxpayer pays January's water bill in December.

There is no difference in the application of the realization principle in these cases.

The realization principle does not apply to cash basis taxpayers. (General Feedback:

Chapter 6 Pages 126 and 136. Cash and accrual taxpayers follow the same rule for prepaid income, but not for prepaid expenses. )

Comments:

Question 3. Question : (TCO 9) A company that measures their taxable income from April 1 through March 31 every year has what type of taxable year?

Calendar year

Fiscal year

Temporary year

None of the above are correct (General Feedback:

Chapter 6, page 119)

Comments:

Question 4. Question : (TCO 9) What is a permanent source of a book/tax difference?

Prepaid income

Bad debts

Related party accruals

Interest on state and local bonds (General Feedback:

Chapter 6, page 144)

Comments:

Question 5. Question : (TCO 9) In which of the following instance(s) is the measurement of net income for tax purposes different for accrual basis and cash basis calendar year taxpayers?

In December, the taxpayer signs a contract for routine legal service to be performed in December and paid for in January of the following year.

The taxpayer's equipment is repaired in November and the bill is paid in December.

The measurement of net income is different in both of these cases.

Net income would be the same under both cash and accrual methods. (General Feedback:

Chapter 6. The concept of substantial economic performance means that the accrual basis taxpayer cannot deduct the cost until the work is performed, unless the work is routine and paid within nine months. The concept does not apply here.)

Comments:

(TCO 10) The tax basis of an asset includes:

the fair market value of property received in a non-taxable exchange.

the fair market value of services given in exchange.

the amount of debt relief given in the exchange.

All of the above (General Feedback:

Chapter 7, lecture)

Comments:

Question 2. Question : (TCO 10) In general, an expenditure must be capitalized for tax purposes if:

it creates or enhances an asset with a useful life of one taxable year.

it results in no long-term benefit to the firm.

tax treatment of the expenditure is certain.

None of the above (General Feedback:

Chapter 7, page 158)

Comments:

Question 3. Question : (TCO 10) On December 15, a calendar year taxpayer placed in service $100,000 of five-year recovery property. If this was in addition to another $250,000 of assets placed into service early in the year, it will be subject to:

the mid-quarter convention.

the mid-month convention.

the half-year convention.

no convention. (General Feedback:

Chapter 7, page 168-169)

Comments:

Question 4. Question : (TCO 10) Bent Pretzel Inc. sold a building that it held for investment for several years. In this transaction, Bent Pretzel received land that it will use in its business. The FMV of the building is $80,000 and the value of the land is $80,000 too. The adjusted basis of the building is $55,000 and the land is $30,000.

What is Bent Pretzel's recognized gain?

$55,000

$25,000

$80,000

$0 (General Feedback:

Chapter 9. Like-kind exchange; no boot.)

Comments:

Question 5. Question : (TCO 10) In a qualifying like-kind exchange, Van Halen exchanges musical equipment with an adjusted basis of $350,000 (fair market value of $300,000) for other musical equipment.

What is his basis in the new equipment?

$200,000

$225,000

$350,000

$230,000 (General Feedback:

Chapter 9. The FMV of the property received transfer basis ($300,000) plus the loss not recognized ($50,000).)

Comments: