i need help with understanding and answers.final exam questions from old test as a study guide

ACCT 553 Final Exam IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.hwspeed.com/ACCT-553-Final-Exam-04040444234.htm?categoryId=-1 IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM Question 1. (TCO E) Interest, dividends, and annuities income are classified as _____. (Points : 5) active income passive income portfolio income None of the above 2. (TCO D) Tom Tanner traded in a printing press with an adjusted basis of $20,000 for a smaller press valued at $12,000. In addition to the smaller press, Tom received $3,000 in cash and was relieved of the existing liability of $5,000 on the old press. What is Tom's recognized gain? (Points : 5) $0 $3,000 $4,800 $5,000 3. (TCO H) Bob and Susan file a joint return for the 2010 tax year. Their adjusted gross income is $80,000. They had a net investment income of $9,000. In 2010, they had the following interest expenses. Personal credit card interest: $5,000 Home mortgage interest: $10,000 Investment interest (on loans used to buy stocks): $10,000 What is the interest deduction for Bob and Susan for the 2010 tax year? (Points : 5) $19,000 $8,000 $16,000 $25,000 4. (TCO B) Bob and Cindy Smith paid the following medical expenses during the year (all in excess of reimbursement). Hospital and doctor bills: $800 Medicine and drugs: $700 Hospitalization insurance premiums: $6,000 Medicine and drugs (for dependent mother, age 71): $1,000 Assuming that the Smiths' adjusted gross income was $60,000, how much of a medical expense deduction may Bob and Cindy claim on their joint return? (Points : 5) $8,170 $4,000 $4,330 $8,500 5. (TCO A) ***** *****, a cash-basis, calendar-year taxpayer, paid the following during the year. You can also visit our web site: www.acehomework.net Social security tax (withheld from wages): $4,500 Real estate taxes: $3,200 State incometax: $3,400 Special assessment for installation of sidewalks: $1,140 Penalty on tax underpayment: $300 Flat fee for automobile registration: $90 What itemized deduction may John claim for taxes on his return? (Points : 5) $7,700 $8,000 $11,190 $6,600 6. (TCO E) Bob sold a piece of business equipment that had an adjusted basis to him of $50,000. In return for the equipment, Josh received $80,000 cash and a painting with a fair market value of $20,000 from the buyer. The buyer also assumed Josh's $25,000 loan on the equipment. Josh paid $5,000 in selling expenses. What is the amount of Josh's gain on the sale? (Points : 5) $90,000 $125,000 $80,000 $70,000 7. (TCO I) In October of 2011, Bobby and ***** ***** sold their residence for $450,000. They purchased it in 2000 for $200,000. They made major capital improvements during their 10-year ownership, which totaled $40,000. What is their recognized gain? (Points : 5) $250,000 $210,000 $0 $450,000 . 8. (TCO I) Which of the following entities may select any tax period (calendar or fiscal)? (Points : 5) Sole partnership Partnership S corporations Corporations other than S corporations 9. (TCO D) For 2011, Greg Grammer had a short-term capital loss of $4,000, a short-term capital gain of $1,900, a short-term capital loss carryover from 2010 of $700, a long-term capital gain of $800, and a long-term capital loss of $1,000. What is Greg's deductible loss in 2011? (Points : 5) $2,560 $2,800 $2,900 $3,000 10. (TCO A) The term "Practice before the IRS" refers to _____. (Points : 5) tax planning for nonprofit organizations macro-economic tax projections representing a client before the IRS tax planning for timber and forest investments 11. (TCO F) To be deductible for tax purposes, a trade or business expenditure must be _____. (Points : 5) ordinary necessary ordinary and necessary ordinary or necessary You can also visit our web site: www.acehomework.net 12. (TCO A) The art of using existing tax laws to pay the least amount of tax legally possible is known as _____. (Points : 5) taxevasion tax avoidance tax elusion None of the above 13. (TCO C) Which of the following items is not subject to federal income tax? (Points : 5) The interest on U.S. Treasury bonds Gambling winnings The interest on loans made in the ordinary course of business Life insurance proceeds 14. (TCO B) Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift, and Sam is neither insolvent nor bankrupt. Which of the following statements is correct concerning the impact of this transaction? (Points : 5) Both Bob and Sam recognize $8,000 of taxable income. Bob recognizes $8,000 of taxable income. Sam recognizes $8,000 of taxable income. Neither Bob nor Sam has any taxable income from this transaction. 15. (TCO G) All of the following income items are includible in an employee's gross income except _____. (Points : 5) severance pay for the cancellation of employment vacation allowance payments from the employer while sick a medical insurance premium paid by the employer for the employee and his or her spouse 16. (TCO F) Fines and penalties paid to the government for the violation of a law are _____. (Points : 5) generally deductible for tax purposes as business expenses not deductible for tax purposes deductible if they are ordinary and necessary deductible if they are reasonable in amount Page 2 1. (TCO E) Zelda Zayer has been a widow for over 3 years and files a return as a single taxpayer. Items of income received by Zelda in 2011 were as follows. Interest on savings account with Bank of America: $50 Interest on state income tax refund: $25 Gambling winnings: $2,400 Dividends from mutual life insurance company on life insurance policy: $500 Dividends from Better Auto Co. received on January 2, 2011: $875 The total dividends received on the life insurance policy do not exceed the aggregate of the premiums paid to the company. (a) How much should Zelda include in her 2011 taxable income as interest? (b) How much should Zelda report as dividend income for 2011? (c) How much should Zelda include in taxable \"Other Income\" for her state lottery winnings? (Points : 17) 2. (TCO E) Distinguish between realized gains and losses and recognized gains and losses. (Points : 17) 3. (TCO F) Describe the current tax law for sale of residence. (Points : 17) 4. (TCO G) Differentiate between the following: active income, passive income, and portfolio income. (Points : 17) You can also visit our web site: www.acehomework.net 5. (TCO I) Jake, a single individual with a salary of $40,000, paid the following expenses during the year. Alimony: $8,000 Charitable contributions: $2,000 Casualty loss (after $100 floor): $1,000 Mortgage interest on personal residence: $3,000 Moving expenses: $1,500 Student loan interest: $1,000 Contribution to a traditional IRA: $2,000 Analyze the above expenses and determine which ones are deductible for AGI. Please support your position. (Points : 17) 6. (TCO I) Carl had the following transactions for 2010. Salary: $55,000 Damage award (compensatory) for city bus accident: $20,000 Loss on sale of stock investment: $4,500 Loan from father to purchase auto: $10,000 Alimony paid to former wife: $11,000 What is Carl's AGI for 2010? (Points : 17) 7. (TCO F) Pam owns a sole proprietorship, and Kevin is the sole shareholder of a C (regular) corporation. Each business sustained a $16,000 operating loss and a $2,500 capital loss for the year. Evaluate how these losses will affect the taxable income of the two owners. (Points : 17) 8. (TCO B) Kyle forms a corporation and transfers property having a basis to him of $20,000 and a fair market value of $30,000 to the corporation for 1,000 shares of $9 par stock. One year later, Bob transfers property having a basis to him of $2,000 and a fair market value of $4,000 for 100 shares of the stock. Bob is not related to Kyle. The corporation issued no other stock. (a) How much gain does Kyle recognize on his exchange? What is the basis to Kyle of his 1,000 shares? (b) How much gain does Bob recognize on his exchange? What is the basis to Bob of his 100 shares? (c) What gain or loss is recognized by the corporation when it issues its shares to Kyle? What is the basis to the corporation of the property it received from Kyle? (Points : 17) 9. (TCO F) Good Co. had a net loss of $75,000 from merchandising operations in 2007. Jane owns Good Co. and works 20 hours a week in the business. She has a large amount of income from other sources and is in the 35% marginal tax bracket. Would Jane's tax situation be better if Good Co. were a proprietorship or aCcorporation? Explain why. (Points : 17) Good Company as a proprietorship is not taxable entity - and all income/loss should be passed through to members. As Jane works 20 hours a week in the business - the passive activity limitation doesn't apply and all losses from operations in 2007 are deductible on Jane's tax return. For the C-corporation loss - the shareholders do not get any personal deduction. The loss stays with the Ccorporation and can be used to offset future taxable income of the corporation or carried back to previous years. 10. (TCO H) On May 18, 2011, Sara Douglas purchased 30 shares of WXY stock for $210, and on October 29, 2011, she purchased 90 additional shares for $900. On November 28, 2011, she sold 48 shares, which could not be specifically identified, for $480, and on December 8, 2011, she sold another 25 shares for $150. What is her recognized gain or loss? (Points : 17) You can also visit our web site: www.acehomework.net ACCT 553 Final Exam IF You Want To Purchase A+ Work then Click The Link Below For Instant Down Load http://www.hwspeed.com/ACCT-553-Final-Exam-04040444234.htm?categoryId=-1 IF You Face Any Problem Then E Mail Us At JOHNMATE1122@GMAIL.COM Question 1. (TCO E) Interest, dividends, and annuities income are classified as _____. (Points : 5) active income passive income portfolio income None of the above 2. (TCO D) Tom Tanner traded in a printing press with an adjusted basis of $20,000 for a smaller press valued at $12,000. In addition to the smaller press, Tom received $3,000 in cash and was relieved of the existing liability of $5,000 on the old press. What is Tom's recognized gain? (Points : 5) $0 $3,000 $4,800 $5,000 3. (TCO H) Bob and Susan file a joint return for the 2010 tax year. Their adjusted gross income is $80,000. They had a net investment income of $9,000. In 2010, they had the following interest expenses. Personal credit card interest: $5,000 Home mortgage interest: $10,000 Investment interest (on loans used to buy stocks): $10,000 What is the interest deduction for Bob and Susan for the 2010 tax year? (Points : 5) $19,000 $8,000 $16,000 $25,000 The total interest deduction for Bob and Susan will be $ 25,000, since all the expenses can be claimed as a deduction 4. (TCO B) Bob and Cindy Smith paid the following medical expenses during the year (all in excess of reimbursement). You can also visit our web site: www.acehomework.net Hospital and doctor bills: $800 Medicine and drugs: $700 Hospitalization insurance premiums: $6,000 Medicine and drugs (for dependent mother, age 71): $1,000 Assuming that the Smiths' adjusted gross income was $60,000, how much of a medical expense deduction may Bob and Cindy claim on their joint return? (Points : 5) $8,170 $4,000 $4,330 $8,500 5. (TCO A) ***** *****, a cash-basis, calendar-year taxpayer, paid the following during the year. Social security tax (withheld from wages): $4,500 Real estate taxes: $3,200 State incometax: $3,400 Special assessment for installation of sidewalks: $1,140 Penalty on tax underpayment: $300 Flat fee for automobile registration: $90 What itemized deduction may John claim for taxes on his return? (Points : 5) $7,700 $8,000 $11,190 $6,600 6. (TCO E) Bob sold a piece of business equipment that had an adjusted basis to him of $50,000. In return for the equipment, Josh received $80,000 cash and a painting with a fair market value of $20,000 from the buyer. The buyer also assumed Josh's $25,000 loan on the equipment. Josh paid $5,000 in selling expenses. What is the amount of Josh's gain on the sale? (Points : 5) $90,000 $125,000 $80,000 $70,000 Amount realized of $125,000 ($80,000 cash + $20,000 art + $25,000 loan assumption) minus $50,000 adj. basis and $5,000 selling expense = $80,000; or 125,000-5,000=120,00050,000=70,000 7. (TCO I) In October of 2011, Bobby and ***** ***** sold their residence for $450,000. They purchased it in 2000 for $200,000. They made major capital improvements during their 10-year ownership, which totaled $40,000. What is their recognized gain? (Points : 5) $250,000 $210,000 $0 $450,000 . 8. (TCO I) Which of the following entities may select any tax period (calendar or fiscal)? (Points : 5) Sole partnership Partnership S corporations Corporations other than S corporations You can also visit our web site: www.acehomework.net 9. (TCO D) For 2011, Greg Grammer had a short-term capital loss of $4,000, a short-term capital gain of $1,900, a short-term capital loss carryover from 2010 of $700, a long-term capital gain of $800, and a long-term capital loss of $1,000. What is Greg's deductible loss in 2011? (Points : 5) $2,560 $2,800 $2,900 $3,000 10. (TCO A) The term "Practice before the IRS" refers to _____. (Points : 5) tax planning for nonprofit organizations macro-economic tax projections representing a client before the IRS tax planning for timber and forest investments 11. (TCO F) To be deductible for tax purposes, a trade or business expenditure must be _____. (Points : 5) ordinary necessary ordinary and necessary ordinary or necessary 12. (TCO A) The art of using existing tax laws to pay the least amount of tax legally possible is known as _____. (Points : 5) taxevasion tax avoidance tax elusion None of the above 13. (TCO C) Which of the following items is not subject to federal income tax? (Points : 5) The interest on U.S. Treasury bonds Gambling winnings The interest on loans made in the ordinary course of business Life insurance proceeds 14. (TCO B) Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift, and Sam is neither insolvent nor bankrupt. Which of the following statements is correct concerning the impact of this transaction? (Points : 5) Both Bob and Sam recognize $8,000 of taxable income. Bob recognizes $8,000 of taxable income. Sam recognizes $8,000 of taxable income. Neither Bob nor Sam has any taxable income from this transaction. 15. (TCO G) All of the following income items are includible in an employee's gross income except _____. (Points : 5) severance pay for the cancellation of employment vacation allowance payments from the employer while sick a medical insurance premium paid by the employer for the employee and his or her spouse 16. (TCO F) Fines and penalties paid to the government for the violation of a law are _____. (Points : 5) generally deductible for tax purposes as business expenses not deductible for tax purposes deductible if they are ordinary and necessary deductible if they are reasonable in amount Page 2 You can also visit our web site: www.acehomework.net 1. (TCO E) Zelda Zayer has been a widow for over 3 years and files a return as a single taxpayer. Items of income received by Zelda in 2011 were as follows. Interest on savings account with Bank of America: $50 Interest on state income tax refund: $25 Gambling winnings: $2,400 Dividends from mutual life insurance company on life insurance policy: $500 Dividends from Better Auto Co. received on January 2, 2011: $875 The total dividends received on the life insurance policy do not exceed the aggregate of the premiums paid to the company. (a) How much should Zelda include in her 2011 taxable income as interest? (b) How much should Zelda report as dividend income for 2011? (c) How much should Zelda include in taxable \"Other Income\" for her state lottery winnings? (Points : 17) A) Taxable income as interest = Interest on income tax refund i.e 25 B) Dividend Income = Dividend received from better auto co.i.e 875 C) Other Income for her state winning lotteries = Gambling winnings i.e 2400 2. (TCO E) Distinguish between realized gains and losses and recognized gains and losses. (Points : 17) Realized gain/loss is the cumulative amount of realized gains and losses resulting from the sale of securities. A realized loss is the monetary value of a loss that results from a trade. A realized gain is the excess of cost basis (or adjusted cost basis) over the proceeds from the sale. Recognized Gain or Loss The amount of gain or loss you report for income tax purposes. You may be able to defer recognizing gain or loss on certain property exchanges, such as like-kind exchanges 3. (TCO F) Describe the current tax law for sale of residence. (Points : 17) The Taxpayer Relief Act of 1997 repealed Code Sec. 1034 (deferral of gain on sale of residence) and amended Sec. 121 (the once-in-a-lifetime exclusion of gain). Prior law under Code Sec. 1034 allowed taxpayers to defer the gain on the sale of a principal residence if a replacement residence was purchased within two years equal to or exceeding the adjusted selling price of the former residence. The current law under Code Sec. 121 is considerably more generous than the old law. For sales or exchanges of residences after May 6, 1997, married taxpayers may exclude up to $500,000 of gain upon the sale of their residence and single taxpayers may exclude up to $250,000 of their gain. Code Sec. 121(b)(1) and (2). Taxpayers must have owned and occupied the residence as their principal residence for two out of the last five years prior to the sale. Code Sec. 121(b)(3)(A). The exclusion applies to only one sale or exchange every two years. Code Sec. 121(b)(3)(B). For married taxpayers, the exclusion is allowed if (1) either spouse meets the ownership test, (2) both spouses meet the use test, and (3) neither spouse is ineligible for exclusion because of a sale or exchange of a residence within the last two years. Code Sec. 121(b)(2)(B),(C), and (D). Because this exclusion replaces the deferral of gain provision of Code Sec. 1034 and the one-time $125,000 exclusion for taxpayers age 55 or older, application of the You can also visit our web site: www.acehomework.net exclusion does not result in a reduction of the basis of a replacement residence as was the case under prior law. 4. (TCO G) Differentiate between the following: active income, passive income, and portfolio income. (Points : 17) Active Income -This is the income an individual earns through participating in some activity with the goal of earning income. This is why the terms active income and earned income are often used interchangeably. For this to be active involvement the activity must be heavily used with the explicit purpose of gaining income. For Example. Wages earned during regular employment, tips that go along with any employment wages, or bonuses achieved during regular employment would all be active income. Passive Income -This is income earned through a trade or investment in which the individual does not spend much time or effort. If this is the regular employment of the individual for which he/she is directly compensated it would be active income. For Example. If an individual owns rental property, but hires an individual for the daily management of the property, any income derived would be passive income. This is true because the individual isn't constantly involved in daily operations of the rental investment. Often, income gained as a silent minority partner in an investment would also qualify as this passive income. Portfolio Income -This type of income is derived directly from investments such as stock earnings, mutual fund investments, or interest income. For Example. If you receive dividends from a corporation for owning stock in that corporation it would be portfolio income since your investment portfolio is generating the income. 5. (TCO I) Jake, a single individual with a salary of $40,000, paid the following expenses during the year. Alimony: $8,000 Charitable contributions: $2,000 Casualty loss (after $100 floor): $1,000 Mortgage interest on personal residence: $3,000 Moving expenses: $1,500 Student loan interest: $1,000 Contribution to a traditional IRA: $2,000 Analyze the above expenses and determine which ones are deductible for AGI. Please support your position. (Points : 17) Student loan interest = $1000 Alimony paid of $8000 Causality lost $900=(1000 -100) Mortgage interest on personal residence: $3,000 You can also visit our web site: www.acehomework.net Moving expenses, assuming all deductible = $1500 Contribution totraditional IRA = $2000 Charitable contributions: $2,000 AGI = 40,000 - 18400 = $21600 The other expenses are deducted after AGI is determined. Casualty loss is an itemized deduction. You need to have the AGI first to get to10% of AGI plus $100 deducted from your loss. Mortgage interest on a taxpayer's personal residence is deductible. 6. (TCO I) Carl had the following transactions for 2010. Salary: $55,000 Damage award (compensatory) for city bus accident: $20,000 Loss on sale of stock investment: $4,500 Loan from father to purchase auto: $10,000 Alimony paid to former wife: $11,000 What is Carl's AGI for 2010? (Points : 17) Carl's AGI: Salary: Loss on sale of stock investment Alimony paid to former wife AGI $55,000 ($3,000) ($11,000) $41,000 1. The Damage award for compensatory damages of $20,000 is not taxable income. 2. The sale on stock investments is limited to a maximum loss of $3,000 in one year 3. The loan of $10000 from the father is not taxable income 7. (TCO F) Pam owns a sole proprietorship, and Kevin is the sole shareholder of a C (regular) corporation. Each business sustained a $16,000 operating loss and a $2,500 capital loss for the year. Evaluate how these losses will affect the taxable income of the two owners. (Points : 17) As a proprietorship is not taxable entity - and all income/loss should be passed through to members. The passive activity limitation is $25,000 - so, because operating losses are less $16,000 - it doesn't matter and full amount is deductible on Pam's tax return. For the C-corporation loss - the shareholders do not get any personal deduction. The loss stays with the C-corporation and can be used to offset future taxable income of the corporation or carried back to previous years. So Kevin would not get any deductions. 8. (TCO B) Kyle forms a corporation and transfers property having a basis to him of $20,000 and a fair market value of $30,000 to the corporation for 1,000 shares of $9 par stock. One year later, Bob transfers property having a basis to him of $2,000 and a fair market value of $4,000 for 100 shares of the stock. Bob is not related to Kyle. The corporation issued no other stock. (a) How much gain does Kyle recognize on his exchange? What is the basis to Kyle of his 1,000 shares? (b) How much gain does Bob recognize on his exchange? What is the basis to Bob of his 100 shares? You can also visit our web site: www.acehomework.net (c) What gain or loss is recognized by the corporation when it issues its shares to Kyle? What is the basis to the corporation of the property it received from Kyle? (Points : 17) (b) (a) First of all , Kyle basis in his initial 1,000 shares of stock is $30,000 ($30 / share). The Assu min g Bob "buys " 100 of Kyle ' s shares for the property. On the sale of 100 shares to Bob for $4,000, Kyle will recognize a gain of $1,00 ($4,000 - $3,00). (b) The corp does not recognize a gain or loss on issuance of new shares of stock . The corp ' s asset basis is the same as the basis transferred in : $30,000. Market value is irrelevant to this transaction. (c) Assume that the asset Bob is trading would not be considered a like - kind asset to Kyle ' s stock . Therefore, Bob would recognize a gain of $2,000 ($4,000 - $2,00) on the transfer / purchase of Kyle ' s stock . Bob ' s new basis on the 100 shares is $4,000. 9. (TCO F) Good Co. had a net loss of $75,000 from merchandising operations in 2007. Jane owns Good Co. and works 20 hours a week in the business. She has a large amount of income from other sources and is in the 35% marginal tax bracket. Would Jane's tax situation be better if Good Co. were a proprietorship or aCcorporation? Explain why. (Points : 17) Good Company as a proprietorship is not taxable entity - and all income/loss should be passed through to members. As Jane works 20 hours a week in the business - the passive activity limitation doesn't apply and all losses from operations in 2007 are deductible on Jane's tax return. For the C-corporation loss - the shareholders do not get any personal deduction. The loss stays with the C-corporation and can be used to offset future taxable income of the corporation or carried back to previous years. 10. (TCO H) On May 18, 2011, Sara Douglas purchased 30 shares of WXY stock for $210, and on October 29, 2011, she purchased 90 additional shares for $900. On November 28, 2011, she sold 48 shares, which could not be specifically identified, for $480, and on December 8, 2011, she sold another 25 shares for $150. What is her recognized gain or loss? (Points : 17) Solution:- 18 May 2011 Price of share =$210/30= $7 29 Oct 2011 Price of share =$900/90= $10 Sale of 48 shares for $480 less price of shares (30*$7+18*$10) = $390 Gain($480-$390)=$90 Sale 25 shares for $150 less price of share(25*10) $250 loss:-(S250-$150)=$100 Thus her recognised loss $100-$90 =$10 You can also visit our web site: www.acehomework.net You can also visit our web site: www.acehomework.net