ENROLLED AGENT FINAL EXAM ACTUAL QUESTIONS AND
ANSWERS GUARANTEE A+
✔✔Which of the following accounting changes do not require the filing of Form 3115 to
request a change in accounting method?
A. Correction of a math error
B. Change from accrual method to cash method
C. Change in the method inventory is valued
D. Change from cash method to accrual method - ✔✔A
✔✔Which of the following accounting methods is not an acceptable method of reporting
income and expenses?
A. If an inventory is necessary to account for your income, you must use an accrual
method for purchases and sales. You can use the cash method for all other items of
income and expenses.
B. If you use the cash method for figuring your income, you can use the accrual method
for figuring your expenses.
C. Any combination that includes the cash method is treated as the cash method.
D. You can use different accounting methods for reporting business and personal items.
- ✔✔B
✔✔Generally, all of the following entities may use the cash method of accounting
except
A. A family farming corporation with gross receipts of $25 million or less.
B. An entity with no inventories and average gross receipts of $5 million or less.
C. A qualified personal service corporation.
D. A corporation that has long-term contracts. - ✔✔D
✔✔A cash-basis taxpayer should report gross income
A. Only for the year in which income is actually received in cash.
B. For the year in which income is either actually or constructively received in cash only.
C. Only for the year in which income is actually received whether in cash or in property.
D. For the year in which income is either actually or constructively received, whether in
cash or in property. - ✔✔D
✔✔Erin earned $1000 in interest in 2014. Erin withdrew $700 in 2015 and $300 in 2016.
How much of the original $1000 should Erin report as interest earned in 2016?
A. $0
B. $300
C. $700
, D. $1000 - ✔✔A
✔✔Which of the following statements is not correct?
A. Under an accrual method of accounting, you generally report income in the year
earned and deduct or capitalize expenses in the year incurred.
B. Under an accrual method of accounting, you generally report receipt of an advance
payment for services to be performed over 3 or more years as income in the year you
receive payment.
C. Under an accrual method of accounting, business expenses and interest owed to a
related person who uses the cash method of accounting are deductible when the all-
events test has been met.
D. Under an accrual method of accounting, you can take a current deduction for taxes
when economic performance occurs. - ✔✔C
✔✔Generally, a substantial business inventory requires use of which method of
accounting?
A. Cash
B. Hybrid
C. Accrual
D. None of the answers are correct - ✔✔C
✔✔John is a cash-basis taxpayer. He received the following items of income in
December 2016:
1. The loan on his truck was forgiven because he performed accounting work for the
dealer. He owed $2000 at the time.
2. A retainer of $500 from a new client to guarantee that his services would be available
in February when the client would need help preparing financial statements.
3. The $800 for work he completed in November 2015.
How much of this income must John include on his 2016 tax return?
A. $500
B. $1300
C. $2500
D. $3300 - ✔✔D
✔✔Mark is an accrual method taxpayer. He shipped $500 worth of merchandise to
Ralph on December 30, 2016. Mark sent Ralph an invoice on January 2, 2017, that was
payable in 30 days. Ralph mailed his check to mark on February 2, 2017. Mark received
and reconciled his bank statement March 3, 2017. When does Mark record the $500 in
income?
ANSWERS GUARANTEE A+
✔✔Which of the following accounting changes do not require the filing of Form 3115 to
request a change in accounting method?
A. Correction of a math error
B. Change from accrual method to cash method
C. Change in the method inventory is valued
D. Change from cash method to accrual method - ✔✔A
✔✔Which of the following accounting methods is not an acceptable method of reporting
income and expenses?
A. If an inventory is necessary to account for your income, you must use an accrual
method for purchases and sales. You can use the cash method for all other items of
income and expenses.
B. If you use the cash method for figuring your income, you can use the accrual method
for figuring your expenses.
C. Any combination that includes the cash method is treated as the cash method.
D. You can use different accounting methods for reporting business and personal items.
- ✔✔B
✔✔Generally, all of the following entities may use the cash method of accounting
except
A. A family farming corporation with gross receipts of $25 million or less.
B. An entity with no inventories and average gross receipts of $5 million or less.
C. A qualified personal service corporation.
D. A corporation that has long-term contracts. - ✔✔D
✔✔A cash-basis taxpayer should report gross income
A. Only for the year in which income is actually received in cash.
B. For the year in which income is either actually or constructively received in cash only.
C. Only for the year in which income is actually received whether in cash or in property.
D. For the year in which income is either actually or constructively received, whether in
cash or in property. - ✔✔D
✔✔Erin earned $1000 in interest in 2014. Erin withdrew $700 in 2015 and $300 in 2016.
How much of the original $1000 should Erin report as interest earned in 2016?
A. $0
B. $300
C. $700
, D. $1000 - ✔✔A
✔✔Which of the following statements is not correct?
A. Under an accrual method of accounting, you generally report income in the year
earned and deduct or capitalize expenses in the year incurred.
B. Under an accrual method of accounting, you generally report receipt of an advance
payment for services to be performed over 3 or more years as income in the year you
receive payment.
C. Under an accrual method of accounting, business expenses and interest owed to a
related person who uses the cash method of accounting are deductible when the all-
events test has been met.
D. Under an accrual method of accounting, you can take a current deduction for taxes
when economic performance occurs. - ✔✔C
✔✔Generally, a substantial business inventory requires use of which method of
accounting?
A. Cash
B. Hybrid
C. Accrual
D. None of the answers are correct - ✔✔C
✔✔John is a cash-basis taxpayer. He received the following items of income in
December 2016:
1. The loan on his truck was forgiven because he performed accounting work for the
dealer. He owed $2000 at the time.
2. A retainer of $500 from a new client to guarantee that his services would be available
in February when the client would need help preparing financial statements.
3. The $800 for work he completed in November 2015.
How much of this income must John include on his 2016 tax return?
A. $500
B. $1300
C. $2500
D. $3300 - ✔✔D
✔✔Mark is an accrual method taxpayer. He shipped $500 worth of merchandise to
Ralph on December 30, 2016. Mark sent Ralph an invoice on January 2, 2017, that was
payable in 30 days. Ralph mailed his check to mark on February 2, 2017. Mark received
and reconciled his bank statement March 3, 2017. When does Mark record the $500 in
income?
