1. A&B Construction enters into a contract to construct a bridge for $1,400,000. At the outset, A&B estimates that it will cost $1,200,000 to build the bridge. Actual costs in 2017 are $540,000. Actual costs in 2018 are less than expected and amount to $600,000. The profits reported under the completed contract and percent of completion methods for each year would be:

2. Under the repair and capitalization regulations, factors to be considered in determining whether a taxpayer is performing routine maintenance include:

Select one:

a.The recurring nature of the activity

b.Industry practice

c.The taxpayer's treatment of the activity on its applicable financial statement

d.A and B only

3. X Company has made sales throughout the year. If prices have been rising constantly throughout the year, then:

Select one:

a.Taxable income will be lower under FIFO

b.Taxable income will be lower under LIFO

c.Taxable income will be lower under weighted average

d.Taxable income will be lower under specific identification

4. A taxpayer may determine the costs to be included in ending inventory under any of the following cost flow assumptions/methods, except :

Select one:

a.Lower of cost or market

b.Specific identification

c.First-in, first-out

d.Last-in, first-out

5. Woodsboro Corp. purchases a parcel of land (the unit of property) without realizing that the soil was contaminated by leaking underground storage tanks left by a previous owner. Under the repair and capitalization regulations, Woodsboro's remediation costs to remove the contaminants and ameliorate a material condition or defect that existed prior to its acquisition of the land are:

Select one:

a.Deducted as a current expense

b.Capitalized as a betterment of the property

c.Amortizable as 197 intangible asset

d.None of the above

6. The simplified resale method requires which of the following indirect costs to be capitalized?

Select one:

a.Marketing costs

b.Off-site storage

c.Purchased inventory

d.All of the above

7. As provided in the regulations under 471 when using the full absorption costs, which of the following costs must be included in or excluded from inventoriable costs, depending on their treatment for financial reporting purposes :

Select one:

a.Research and development costs

b.Rent

c.Factory administrative expenses

d.Indirect labor

8. Which of the following may not be used as a basis for making allocations of indirect costs under the manufacturing burden rate method?

Select one:

a.Units produced

b.Machine costs

c.Machine hours

d.Direct labor hours

9. The regulations provide that merchandise should be included in inventory of the taxpayer having ownership of the property. This is determined by all facts and circumstances. These include all of the following except:

Select one:

a.Intent of the parties

b.Benefits and burdens of ownership

c.Who bears the risk of loss

d.State of incorporation

O a. $0 O b. $0 Completed Contract 2017 2018 $200,000 Completed Contract 2017 2018 $260,000 Completed Contract 2017 2018 $0 $260,000 Completed Contract 2017 2018 $0 $260,000 Percentage of Completion 2017 2018 $90,000 $170,000 Percentage of Completion 2017 2018 $90,000 $170,000 Percentage of Completion 2017 2018 $123,000 $197,000 Percentage of Completion 2017 2018 $90,000 $110,000 C. O d