KAPLAN AC256 UNIT 4 EXAM LATEST 2016 JANUARY

Grading Summary

These are the automatically computed results of your exam. Grades for essay questions, and comments from your instructor, are in the "Details" section below.

Date and Time Started: 2/7/2016 4:35:37 AM

Time Spent: 32 min , 20 secs

Points Received: 56 / 80 (70%)

Question Type: # Of Questions: # Correct:

Multiple Choice 20 14

Grade Details - All Questions

Question 1. Question :

Which of the following items will result in an inclusion in gross income?

Receipt of a $10,000 check from the bank. The check is for a student loan.

Receiving a $10,000 award from a university for high grades and high SAT scores. The award is used to pay tuition.

Preparing a mechanic's tax return in exchange for the mechanic replacing the muffler on your car.

None of the above will be included in gross income.

Points Received: 4 of 4

Comments:

Question 2. Question :

Britney is beneficiary of a $150,000 insurance policy on her father's life. Upon his death, she may elect to receive the proceeds in five yearly installments of $32,000 or may take the $150,000 lump sum. She elects to take the lump sum payment. What are the tax consequences in year one?

All $32,000 each year is taxable.

$10,000 interest is taxable in the first year.

There is no taxable income.

The lump sum payment is taxable.

Points Received: 4 of 4

Comments:

Question 3. Question :

Over the years, Rianna paid $65,000 in premiums on a life insurance policy with a face value of $100,000. Upon reaching 65, while still in good health, Rianna surrendered the policy and collected $95,000. In the year of collection, Rianna will report

no income.

$30,000 of taxable income.

$5,000 of tax loss.

$95,000 of taxable income.

Points Received: 4 of 4

Comments:

Question 4. Question :

Natasha is a single taxpayer with a 28% marginal tax rate. She received distributions of earnings this year as follows:

CE Corp., a C corporation $1,000

SE Corp., an S Corporation 2,000

Paris Corp., a foreign corporation 3,000

How much of the $6,000 distribution will be taxed at the 15% tax rate?

$0

$1,000

$3,000

$6,000

Points Received: 0 of 4

Comments:

Question 5. Question :

Norah's Music Lessons Inc. is a calendar-year taxpayer using the accrual method of accounting. On October 1 of this year, the corporation received $1,200 for a 1-year contract beginning on that date to provide 10 lessons. The company provided six lessons this year under the contract. How much should corporation include in income this year with respect to this contract?

$480

$360

$720

$1,200

Points Received: 4 of 4

Comments:

Question 6. Question :

Frasier and Marcella, husband and wife, file separate returns. Frasier and Marcella live in a community property state that considers separate property income to be separate. Frasier's salary is $42,000 and Marcella's salary is $46,000. Marcella receives dividend income of $4,000 from stock inherited from her parents. Frasier receives interest income of $1,000 from bonds purchased with his salary after marriage. Frasier and Marcella receive $3,200 dividend income from stock they purchased jointly. Marcella's income would be

$50,000

$50,100

$51,100

$51,600

Points Received: 4 of 4

Comments:

Question 7. Question :

Derrick was in an automobile accident while he was going to work. The doctor advised him to stay home for eight months due to his physical injuries. The resulting lawsuit was settled and Derrick received the following amounts:

Compensatory damages for physical injury $80,000

Punitive damages 95,000

How much of the settlement must Derrick include in ordinary income on his tax return?

$0

$80,000

$95,000

$175,000

Points Received: 4 of 4

Comments:

Question 8. Question :

Brad suffers from congestive heart failure and has been admitted to a nursing home where he is expected to spend the remainder of his life. His doctor has certified him as chronically ill. Brad receives $320 per day from his life insurance policy for 100 days ($32,000) as accelerated death benefits. Brad's nursing home care costs $300 per day ($30,000 for the 100 days of care). Brad will be allowed to exclude

$0.

$30,000.

$32,000.

$2,000.

Points Received: 4 of 4

Comments:

Question 9. Question :

During the year, Cathy received the following:

• Dividends of $4,000 from Lindsay Corporation. Cathy's father owned the stock and directed the corporation to send the dividends to Cathy.

• A car worth $30,000 for being the 1,000th customer at a car dealership.

• $5,500 cash gift from her uncle.

• $10,000 inheritance from her grandmother.

What amount must Cathy include in gross income?

$30,000

$34,000

$39,500

$49,500

Points Received: 0 of 4

Comments:

Question 10. Question :

Norah, who gives music lessons, is a calendar-year taxpayer using the cash basis method of accounting. On October 1 of this year, she received $1,200 for a 1-year contract beginning on that date to provide 10 lessons. She gave six lessons this year. How much should Norah include in income this year?

$480

$360

$720

$1,200

Points Received: 4 of 4

Comments:

Question 11. Question :

Which of the following criteria is not required under the tax concept of income?

There must be economic benefit.

Income must be realized.

Income must be recognized.

Cash must be received.

Points Received: 0 of 4

Comments:

Question 12. Question :

Which of the following is not excluded from income? (Assume that any amounts received by the taxpayer were kept.)

Public assistance payments

Fair market value of prize won on a game show

Gifts and inheritances

Life insurance proceeds paid by reason of death

Points Received: 0 of 4

Comments:

Question 13. Question :

Amy's employer provides her with several fringe benefits. Which of the following are included in her taxable income?

Christmas bonus check

Group term life insurance premium paid by employer for $40,000 coverage for Amy

Employee discount

Employer's contribution to retirement plans on Amy's behalf

Points Received: 4 of 4

Comments:

Question 14. Question :

Which of the following statements is false?

Under the cash method, prepaid income such as rent is usually taxed when received rather than when earned.

Municipal bond interest is taxable.

Alimony received by the taxpayer is taxable.

Income earned by selling goods on the Internet is taxable.

Points Received: 4 of 4

Comments:

Question 15. Question :

Richard is a key employee of Winn Corporation. The corporation provides Richard with $120,000 of group-term life insurance coverage. Only company executives receive life insurance coverage. The premium attributable to the coverage is $1,600. The uniform 1-month group-term premium is one dollar per $1,000 of coverage. How much must Richard include in income due to the policy?

INCORRECT $0

$840

$1,440

$1,600

Points Received: 0 of 4

Comments:

Question 16. Question :

Rebecca is the beneficiary of a $500,000 insurance policy on her husband's life. She elects to receive $52,000 per year for 10 years rather than receive the entire amount in a lump sum. Of the amount received each year

$2,000 is taxable income.

$50,000 is taxable income.

$52,000 is taxable income.

$5,000 per year is tax free as a death benefit.

Points Received: 4 of 4

Comments:

Question 17. Question :

In December 2014, Max, a cash basis taxpayer, rents an apartment to Kadeem. Max receives both the first and last months' rent totaling $1,800 plus a security deposit of $400. The amount of income reported as taxable in 2014 is

$400.

$1,300.

$1,800.

$2,200.

Points Received: 4 of 4

Comments:

Question 18. Question :

Which of the following bonds do not generate tax-exempt federal income?

U.S. Treasury bonds

Bonds issued by fire districts

School district bonds

Bonds issued by cities

Points Received: 4 of 4

Comments:

Question 19. Question :

Amanda, who lost her modeling job, sued her employer for age discrimination. She was awarded $75,000 in lost wages, $25,000 for emotional distress, and $150,000 punitive damages. The amount taxable is

$0.

$150,000.

$225,000.

$250,000.

Points Received: 0 of 4

Comments:

Question 20. Question :

Linda was injured in an automobile accident caused by another driver. Her son, Matthew, was in the automobile but not physically injured. The other driver's insurance company was required by a court to pay Linda $75,000 to cover medical bills relating to her injuries, $30,000 to compensate her for emotional distress attributable to the injuries, and $40,000 of punitive damages. Matthew was paid $15,000 to compensate him for emotional distress attributable to his witnessing his mother's injuries. What is the amount taxable to Linda?

$30,000

$40,000

$105,000

$145,000

Points Received: 4 of 4

Comments: