ACCT 330 CH 5 Intermediate Accounting I Study Set, University of Kansas
School of Business, 2026/2027 – 100-Question GAAP & FASB
Codification Examination with Verified Solutions
All recognized gains and losses must eventually be classified either as capital or
ordinary. - ANSWSER-True
In 2013, five different capital gain tax rates could apply to long-term capital assets sold
by noncorporate taxpayers. - ANSWSER-True
A taxpayer sells an asset with a basis of $25,000 to an unrelated party for $28,000. The
taxpayer has a realized gain of $3,000. - ANSWSER-True
Gains and losses are recognized when property is disposed of by gift or bequest. -
ANSWSER-True
On January 1, 2013, Brad purchased 100 shares of stock at $4,000. By December 31,
2013, the stock had declined in value to $2,200, but Brad still held the shares. For 2013,
Brad has recognized a $1,800 loss for tax purposes. - ANSWSER-FALSE
Rick sells stock of Ty Corporation, which has an adjusted basis of $20,000, for $22,000.
He pays a sales commission of $500. In computing his gain or loss, the amount realized
by Rick is $1,500. - ANSWSER-False
The initial adjusted basis of property depends upon how the property is acquired. -
ANSWSER-True
Expenditures which do not add to the value or prolong the life of property may be
expensed in the year in which they are incurred. - ANSWSER-True
A taxpayer purchased an asset for $50,000 several years ago. He is now planning to
sell it. Under the recovery of basis doctrine the taxpayer will not recognize any gain or
pay any related taxes unless he sells the asset for more than $50,000. - ANSWSER-
True
All realized gains and losses are recognized for tax purposes. - ANSWSER-False
Losses are generally deductible if incurred in carrying on a trade or business or incurred
in an activity engaged in for profit. - ANSWSER-True
, If Houston Printing Co. purchases a new printing press during the current year for
$30,000, pays sales taxes of $2,000, and pays $1,000 for installation, the cost basis for
the printing press is $33,000. - ANSWSER-True
Funds borrowed and used to pay for an asset are not included in the cost until the
borrowed funds are repaid. - ANSWSER-False
Interest incurred during the development and manufacture of a machine must be
capitalized. - ANSWSER-True
Capitalization of interest is required if debt is incurred to construct real property. -
ANSWSER-True
If stock sold or exchanged is not specifically identified, the FIFO (first-in, first-out)
method of identification must be used. - ANSWSER-True
An uncle gifts a parcel of land to his niece, and he has to pay gift taxes. The land has
appreciated substantially since he purchased it 20 year ago. A portion of gift taxes paid
by the uncle will increase the niece's basis of the land. - ANSWSER-True
With regard to taxable gifts after 1976, no gift tax is added to the basis of the property if
the donor's basis is greater than the FMV of the property. - ANSWSER-True
Unless the alternate valuation date is elected, the basis of property received from a
decedent is generally the property's fair market value at the date of decedent's death. -
ANSWSER-True
For purposes of calculating depreciation, property converted from personal use to
business use will take on a basis equal to the lower of its FMV or its adjusted basis on
the date of the conversion. - ANSWSER-True
In a basket purchase, the total cost is apportioned among the assets purchased
according to the relative fair market value of the assets. - ANSWSER-True
If the stock received as a nontaxable stock dividend is not the same type as the stock
owned prior to the dividend, the allocation of basis is based on relative fair market
values of the stock. - ANSWSER-True
Section 1221 of the Code includes a comprehensive list of assets properly classified as
capital assets. - ANSWSER-False
Section 1221 specifically states that inventory or property held primarily for sale to
customers is not classified as a capital asset of the trade or business. - ANSWSER-
True
A building used in a trade or business is a capital asset. - ANSWSER-False
Normally, a security dealer reports ordinary income on the sale of securities unless it is
specifically identified as a security being held for investment. - ANSWSER-True
Bad debt losses from nonbusiness debts are deductible only as short-term capital
losses regardless of when the debt occurred. - ANSWSER-True
A nonbusiness bad debt is deductible only in the year in which the debt becomes totally
worthless. - ANSWSER-True
If a capital asset held for one year or more is sold at a gain, the gain is classified as
long-term capital gain. - ANSWSER-False
Net long-term capital gains receive preferential tax treatment if they exceed net short-
term capital losses. - ANSWSER-True
Adjusted net capital gain is taxed at 15% for taxpayers with marginal tax rates of 15% or
higher, but less than 39.6%. - ANSWSER-False
School of Business, 2026/2027 – 100-Question GAAP & FASB
Codification Examination with Verified Solutions
All recognized gains and losses must eventually be classified either as capital or
ordinary. - ANSWSER-True
In 2013, five different capital gain tax rates could apply to long-term capital assets sold
by noncorporate taxpayers. - ANSWSER-True
A taxpayer sells an asset with a basis of $25,000 to an unrelated party for $28,000. The
taxpayer has a realized gain of $3,000. - ANSWSER-True
Gains and losses are recognized when property is disposed of by gift or bequest. -
ANSWSER-True
On January 1, 2013, Brad purchased 100 shares of stock at $4,000. By December 31,
2013, the stock had declined in value to $2,200, but Brad still held the shares. For 2013,
Brad has recognized a $1,800 loss for tax purposes. - ANSWSER-FALSE
Rick sells stock of Ty Corporation, which has an adjusted basis of $20,000, for $22,000.
He pays a sales commission of $500. In computing his gain or loss, the amount realized
by Rick is $1,500. - ANSWSER-False
The initial adjusted basis of property depends upon how the property is acquired. -
ANSWSER-True
Expenditures which do not add to the value or prolong the life of property may be
expensed in the year in which they are incurred. - ANSWSER-True
A taxpayer purchased an asset for $50,000 several years ago. He is now planning to
sell it. Under the recovery of basis doctrine the taxpayer will not recognize any gain or
pay any related taxes unless he sells the asset for more than $50,000. - ANSWSER-
True
All realized gains and losses are recognized for tax purposes. - ANSWSER-False
Losses are generally deductible if incurred in carrying on a trade or business or incurred
in an activity engaged in for profit. - ANSWSER-True
, If Houston Printing Co. purchases a new printing press during the current year for
$30,000, pays sales taxes of $2,000, and pays $1,000 for installation, the cost basis for
the printing press is $33,000. - ANSWSER-True
Funds borrowed and used to pay for an asset are not included in the cost until the
borrowed funds are repaid. - ANSWSER-False
Interest incurred during the development and manufacture of a machine must be
capitalized. - ANSWSER-True
Capitalization of interest is required if debt is incurred to construct real property. -
ANSWSER-True
If stock sold or exchanged is not specifically identified, the FIFO (first-in, first-out)
method of identification must be used. - ANSWSER-True
An uncle gifts a parcel of land to his niece, and he has to pay gift taxes. The land has
appreciated substantially since he purchased it 20 year ago. A portion of gift taxes paid
by the uncle will increase the niece's basis of the land. - ANSWSER-True
With regard to taxable gifts after 1976, no gift tax is added to the basis of the property if
the donor's basis is greater than the FMV of the property. - ANSWSER-True
Unless the alternate valuation date is elected, the basis of property received from a
decedent is generally the property's fair market value at the date of decedent's death. -
ANSWSER-True
For purposes of calculating depreciation, property converted from personal use to
business use will take on a basis equal to the lower of its FMV or its adjusted basis on
the date of the conversion. - ANSWSER-True
In a basket purchase, the total cost is apportioned among the assets purchased
according to the relative fair market value of the assets. - ANSWSER-True
If the stock received as a nontaxable stock dividend is not the same type as the stock
owned prior to the dividend, the allocation of basis is based on relative fair market
values of the stock. - ANSWSER-True
Section 1221 of the Code includes a comprehensive list of assets properly classified as
capital assets. - ANSWSER-False
Section 1221 specifically states that inventory or property held primarily for sale to
customers is not classified as a capital asset of the trade or business. - ANSWSER-
True
A building used in a trade or business is a capital asset. - ANSWSER-False
Normally, a security dealer reports ordinary income on the sale of securities unless it is
specifically identified as a security being held for investment. - ANSWSER-True
Bad debt losses from nonbusiness debts are deductible only as short-term capital
losses regardless of when the debt occurred. - ANSWSER-True
A nonbusiness bad debt is deductible only in the year in which the debt becomes totally
worthless. - ANSWSER-True
If a capital asset held for one year or more is sold at a gain, the gain is classified as
long-term capital gain. - ANSWSER-False
Net long-term capital gains receive preferential tax treatment if they exceed net short-
term capital losses. - ANSWSER-True
Adjusted net capital gain is taxed at 15% for taxpayers with marginal tax rates of 15% or
higher, but less than 39.6%. - ANSWSER-False
