[14] J. Ripper spent several years studying the human body. Finally, her research provided a new method for making surgical incisions that left no scars. Much to Rippers astonishment, she was awarded a Nobel Prize that year. Ripper was awarded $50,000 outright (which was paid directly to a recognized charity designated by Ripper) and another $75,000 on the condition that she continue her research. How much must Ripper include in gross income for the year? A. $0 B. $50,000 C. $75,000 D. $125,000

[15] Dowd, a cash-basis engineering consultant, wanted to defer income to next year. A client who was in Dowds office on December 31 of the current year offered to pay his $2,000 bill immediately, but Dowd told him to pay in January. A check for $5,000 from another client arrived in the mail on December 29, and Dowd told his office manager not to deposit it until January. Dowd also told his office manager not to send a client a bill for $3,000 for services performed in the current year until January of next year. How much income from these transactions should Dowd report in the current year? A. $8,000 B. $7,000 C. $5,000 D. $0

[16] Mat West, a cash-basis taxpayer, owned interests in several corporations. The Wireless Corporation made a practice of sending dividend checks out to all shareholders on the last day of December, so the shareholders would not receive them until January. West received a $50 dividend check from Wireless on January 3, Year 2. The Palace Hotel, Inc., in which West was an officer, mailed its dividend checks in the same manner as Wireless. However, Wests $400 check was placed on his office desk on December 31, Year 1. West owned a controlling interest in Gambling Saloon, Inc., and told the bookkeeper not to write his check, which was to be for $6,000, even though all other shareholders checks were written and delivered in December, Year 1. How much dividend income does West have in Year 1? A. $0 B. $450 C. $6,400 D. $6,450

17) What is the amount of income to be reported by Mr. X in Year 2 under the cash method of accounting for the following items?

Check for $1,200 received January 4, Year 2, for services rendered in December Year 1. Check for $900 received December 26, Year 2, for services rendered in October, Year 2; did not cash until January 5, Year 3.

Dividend check for $500. Check was dated December 31, Year 2, but it is the practice of the issuing corporation to mail checks so they will not be received until January of the following year.

Check for $600 received on April 1, Year 2, for interest on corporate bonds held for the period October 1, Year 1, through March 31, Year 2.

Rental income of $800 for December Year 2 received January 3, Year 3. A. $1,800 B. $2,700 C. $3,500 D. $4,000

[18] Basil Company, a cash-basis taxpayer, had the following activity during 2013: Sales in 2013, uncollected $ 40,000 Sales in 2013, collected 1,000,000 Total sales in 2013 1,040,000 Collections on 2012 bad debt 50,000 What is the correct amount of income to be reported for 2013? A. $1,040,000 B. $1,000,000 C. $1,050,000 D. $1,090,000

[19] Peter is an auto mechanic. On November 25, 2013, he made some major auto repairs on Harrys Mercedes. Harry is an attorney. In exchange for the service, Harry is going to draft Peters will and represent him when he settles on his new house. Harry will perform all of these services in 2014. The repair bill for the Mercedes came to $1,200. Both Peter and Harry are cash-basis taxpayers. How do they report this income?

A. Both report $1,200 income in 2013. B. Both report $1,200 income in 2014. C. Harry reports $1,200 in 2013, and Peter reports $1,200 in 2014. D. Peter reports $1,200 in 2013, and Harry reports $1,200 in 2014.

20)

[21] Mr. J, a cash-method taxpayer, operates a business and files his return on a calendar-year basis. In Year 1, Mr. J took out a 3-year fire insurance policy on his building effective November 1. On January 1, Year 2, Mr. J paid a premium of $1,800 for the 3 years. What amount may Mr. J deduct as an insurance expense in Year 2? A. $100 B. $600 C. $700 D. $1,800

[22] Dr. Berger reports on the cash basis. The following items pertain to Dr. Bergers medical practice in Year 2: Cash received from patients in Year 2 $200,000 Cash received in Year 2 from third-party reimbursers for services provided by Dr. Berger in Year 1 30,000 Salaries paid to employees in Year 2 20,000 Year 2 year-end bonuses paid to employees in Year 3 1,000 Other expenses paid in Year 2 24,000

What is Dr. Bergers net business income for Year 2 from his medical practice? A. $155,000 B. $156,000 C. $185,000 D. $186,000