QUESTION 1 - Bev is the sole owner of Bev & Associates, an accrual basis corporation. In 2016, Bev & Associates has a bad year and Bev lends the corporation $50,000 to meet expenses. The corporation accrues interest expense of $5,000 on the loan from Bev, but does not pay the interest to her in cash.

How much of the $5,000 in accrued interest expense can Bev & Associates deduct on its 2016 corporate tax return? Explain.

QUESTION 2 - Richard is employed by a major defense contractor and earns $156,000 in 2016. Calculate:

a. The amount of Social Security tax withheld from his income

b. The amount of Medicare tax withheld from his income

c. The amount of FUTA withheld from his income

QUESTION 3 - Explain the use of the half-year convention for MACRS depreciation for assets other than real estate and the exception to the half-year convention rule.

QUESTION 4 - If a cash basis business owner pays 18 months of rent expense in advance during the last month of the tax year, how is this treated on the tax return? What is the reason tax law requires this treatment?