1. Megair Corp. manufactures two types of airplanes: small, general aviation planes that require approximately six months to complete & large jet aircrafts sold to airlines that require two years to complete. Megair maintains an inventory of the small planes but manufactures the large planes to contract specification. Megair must use the long-term contract accounting rules for both types of planes.

Select one:

True

False

2. Fixed indirect production costs are not required to be treated as inventoriable costs for tax purposes

Select one:

True

False

3. Taxpayer purchases ten computers at $3,000 each for a total cost of $30,000, per the invoice. Taxpayer does not have an applicable financial statement but does have accounting procedures in place at the beginning of the year to expense amounts paid for property costing less than $2,500. Taxpayer records $25,000 as an expense on its books and capitalizes the remaining $5,000. The amounts paid for the computers meets the de minimis safe harbor for tax purposes resulting in no book/tax difference in treatment.

Select one:

True

False

4. Non-inventoriable costs under 263A include all of the following except:

Select one:

a.Design costs

b.Selling and distribution costs

c.Taxes assessed on the basis of income

d.Deductible service costs

5. As provided in the regulations under 471, when using the full absorption costs, which of the following can be excluded from inventoriable costs?

Select one:

a.Interest expense

b.Utilities

c.Indirect labor

d.None of the above

6. Direct labor costs include?

Select one:

a.Basic compensation

b.Vacation pay

c.Unemployment benefits

d.All of the above

7. ABC Corp. makes the following fixed asset acquisitions in 2018:

Office furniture on February 15 for $40,000

Copier on June 30 for $5,000

Improvements (constituting real property) to the office building on October 15 for $100,000

Machinery on December 1 for $25,000

Assuming ABC does not make a 179 election with respect to any of its acquisitions and the ADS method is not used, which of the following statements is true:

Select one:

a.The mid-quarter convention is not applicable

b.All acquisitions will use the half-year convention

c.All depreciation will be calculated using the double declining balance method

d.AAll acquisitions will use the mid-month convention.

8. The imputed interest rules of 7872 explicitly apply to all of the following types of loans except:

Select one:

a.Gift loans

b.Corporation shareholder loans

c.Notes related to sales of property

d.Compensation related loans