ACC 124 Final Exam Review 2023 LATEST UPDATE

ACC 124 Final Exam Review 2023 LATEST UPDATE For 2019, the maximum base for the SocialSecurity portion of the FICA tax is: a. $128,700 b. $132,900 c. $127,200 d. $128,400 e. None of these choices are correct. correct answer- b. $132,900 Which one of the following provisions was passed by Congress to meet a social goal of the tax law? a. The moving expense deduction for adjusted gross income. b. The deduction for soil and water conservation costs available to farmers. c. The charitable deduction. d. The deduction for job hunting expenses. e. None of these choices are correct. correct answer- c. The charitable deduction. Which of the following is not considered one of the five basic taxable or reporting entities? a. Corporation b. Partnership c. Individual d. Portfolio e. Trust correct answer- d. Portfolio Oscar and Mary have no dependents and file a joint income tax return for 2019. They have adjusted gross income (all wages) of $140,000 and itemized deductions of $30,000. What is the amount of taxable income that Oscar and Mary must report on their 2019 income tax return? a. $110,000 b. $116,000 c. $140,000 d. $93,600 e. $102,000 correct answer- a. $110,000 Which one of the following forms must an employer provide to his employee by January 31 of the following year? a. W-2 b. 1040 c. W-3 d. 941 e. W-4 correct answer- a. W-2 John, age 25, is a full-time student at a state university. John lives with his unmarried sister, Ann, who provides over half of his support. His only income is $4,300 of wages from a part-time job at the college book store. What is Ann's filing status for 2019? a. Qualifying widow(er) b. Single c. Head of household d. Married, filing separately e. None of these choices are correct. correct answer- b. Single William is a divorced taxpayer who provides a home for his dependent child, Edward. What filing status should William indicate on his tax return? a. Married, filing separately b. Qualifying widow(er) c. Head of household d. Single e. None of these choices are correct. correct answer- c. Head-of-household All of the following must be included in gross income, except: a. Gambling winnings b. Dividends c. Jury duty fees d. Partnership income e. Accident insurance proceeds correct answer- e. Accident insurance proceeds Mary received the following items during the current year: Christmas bonus from her employer $600 Christmas gift from her father $100 Unemployment compensation $35 What is the total amount of the above items that must be included in Mary's current year gross income? a. $100 b. $135 c. $0 d. $600 e. $635 correct answer- e. $635 Tim, a single taxpayer, receives $500 of qualified dividends from Exxon in the current year. His taxable income before the dividends is $26,000. Tim's tax on the dividends will be: a. $100 b. $50 c. $0 d. $75 e. $25 correct answer- c. $0 Roger is required under a 2012 divorce decree to pay $500 of alimony and $200 of child support per month for 12 years. In addition, Roger makes a voluntary payment of $100 per month. How much of the total monthly payment is deductible by Roger? a. $500 b. $600 c. $0 d. $200 e. None of these choices are correct. correct answer- a. $500 Nicole is a student at USB Law School; she receives a $52,000 scholarship for 2019. Of the $52,000, $40,000 is used for tuition, $5,000 is used for books, and $7,000 is used for room and board. How much of the scholarship is excluded from taxable income for Nicole in 2019? a. $5,000 b. $7,000 c. $52,000 d. $47,000 e. $45,000 correct answer- e. $45,000 In which of the following cases may the employee exclude the meals and/or lodging: a. An employee has an option of dining in an all-expense paid employer-sponsored cafeteria or dining out of the office. b. A taxpayer lives rent-free at the property she manages even though the owner does not require the manager to live on site. c. A headmaster at a boarding school is required to be on campus all night. d. A president of a major film studio receives a cash allowance to live in Beverly Hills. correct answer- c. A headmaster at a boarding school is required to be on campus all night. What income tax form does a self-employed sole proprietor usually use to report business income and expense? a. Form 2106, Employee Business Expenses b. Schedule B c. Schedule A, Miscellaneous Itemized Deductions d. Schedule C e. None of these choices are correct. correct answer- d. Schedule C Generally, for an activity to be treated as a trade or business, which of the following is required: a. Regular and continual effort designed to seek profit b. Always generate a profit c. Organization as a corporation or partnership d. No more than intermittent effort toward the activity correct answer- a. Regular and continual effort designed to seek profit Acacia Company had inventory of $300,000 on December 31, 20X1. Other information is as follows: Purchases: $1,500,000 Sales: $1,800,000 Inventory 1/1/20X1: 500,000 What is the amount of Acacia's cost of goods sold for 20X1? a. $1,600,000 b. $2,000,000 c. $1,800,000 d. $1,700,000 e. None of these choices are correct. correct answer- $1,700,000 Which of the following items incurred while on travel is not considered a travel expense? a. Transportation costs b. The cost of lodging c. Cost of entertaining clients d. The cost of meals e. None of these choices are correct. correct answer- c. Cost of entertaining clients. Choose the correct answer: a. Expenses for travel as a form of education are not deductible. b. The cost of a CPA review course is deductible by a bookkeeper on his Schedule C. c. Expenses required for education to maintain skills for the taxpayer's current business are not deductible. d. Education expenses are deductible on Schedule C even if the education qualifies the taxpayer for a new trade or business. correct answer- a. Expenses for travel as a form of education are not deductible. Sol purchased land as an investment on February 12, 2018 for $85,000. On January 31, 2019, Sol sold the land for $90,000 cash. What is the nature of the gain or loss? a. Short-term capital gain b. Long-term capital loss c. Short-term capital loss d. Long-term capital gain e. None of these choices are correct. correct answer- a. Short-term capital gain If property is inherited by a taxpayer, a. At sale date, the recipient will not have a gain or loss even if the recipient has held the property for more than a year. b. At sale date, the basis of the property to the recipient differs depending on whether the property was sold at a gain or a loss. c. To the recipient, the basis for the property is the same as the basis to the decedent. d. In general, the basis to the recipient is the fair market value at the decedent's date of death. correct answer- d. In general, the basis to the recipient is the fair market value at the decedent's date of death. An asset has an original basis of $25,000 and depreciation has been claimed for the asset in the amount of $20,000. If the asset's adjusted basis is $15,000, what is the amount of capital improvements that have been made to the asset? a. $10,000 b. $5,000 c. $30,000 d. $20,000 e. None of these choices are correct. correct answer- a. $10,000 For the current year, Susan had salary income of $20,000. In addition, she reported the following capital transactions during the year: Long-term capital gain: $7,000 Short-term capital gain: $3,000 Long-term capital loss: (2,000) Short-term capital loss: (5,000) There were no other items includable in her gross income. What is the amount of her adjusted gross income for the current year? a. $24,000 b. $19,000 c. $23,000 d. $25,000 e. None of these choices are correct. correct answer- $23,000 Jerry bought his home 15 years ago for $60,000. Three years ago, Jerry married Debbie and she moved into the same house and has lived there since. If they sell Jerry's house in the current year for $340,000, what is their taxable gain on a joint tax return? a. $155,000 b. $280,000 c. $30,000 d. $0 correct answer- d. $0 What percentage of medical insurance payments can self-employed taxpayers deduct for adjusted gross income on their 2019 tax returns, assuming their self-employment income exceeds their medical insurance payments? a. 50 percent b. 70 percent c. 90 percent d. 100 percent e. 60 percent correct answer- d. 100 percent Which of the following is not an exception to the 10% early withdrawal penalty of a traditional IRA: a. Withdrawing up to $30,000 of first-time home-buying expenses b. Paying the costs of higher education, including tuition, fees, books, and room and board for a dependent child c. Using the withdrawals for medical expenses in excess of 10 percent of their AGI, for persons younger than 59½ years old d. Over 59½ years old correct answer- Withdrawing up to $30,000 of first-time home-buying expenses Contributions by a self-employed individual to a SEP plan for 2019 are limited to the lesser of a percent of net earned income or: a. $55,000 b. $0 c. $19,000 d. $56,000 e. None of these choices are correct. correct answer- d. $56,000 Which of the following is not considered a deductible medical expense? a. Medical insurance b. Prescription drugs c. A face lift d. Eye exams correct answer- c. A face lift During the current year, Seth, a self-employed individual, paid the following taxes: Federal income tax: $15,000 State income tax: $8,500 Real estate taxes on land in South America (held as an investment): $1,000 State sales taxes: $300 Personal property taxes based upon value: $1,600 Federal self-employment tax: $800 What amount can Seth claim as an itemized deduction for taxes paid during the current year? a. $10,000 b. $11,400 c. $10,100 d. $9,500 e. None of these choices are correct. correct answer- a. $10,000 Amy paid the following interest expense during the current year: Qualified home mortgage interest: $5,000 Credit card interest: $1,000 Personal bank loan interest: $3,000 What is the amount of Amy's interest deduction for the current year? a. $4,000 b. $5,000 c. $3,000 d. $8,000 e. $6,000 correct answer- b. $5,000 Tom, a cash basis sole proprietor, provides the following information: Gross receipts: $30,000 Dividend income (on personal investments): 200 Cost of sales: 15,400 Other operating expenses: 3,000 State business taxes paid: 300 What amount should Tom report as net earnings from self-employment? a. $11,400 b. $10,900 c. $11,300 d. $14,400 e. None of these choices are correct. correct answer- c. $11,300 Which of the following is not an acceptable method of accounting under the tax law? a. The cash method b. The accrual method c. The hybrid method d. All of these choices are acceptable. e. None of these choices are acceptable. correct answer- d. All of these choices are acceptable. Mary sells to her father, Robert, her shares in AA Corp for $55,000. The shares cost Mary $80,000. How much loss may Mary claim from the sale? a. $55,000 b. $80,000 c. $25,000 d. $0 e. None of these choices are correct. correct answer- d. $0 Tom, age 13, is claimed as a dependent by his parents. Tom has unearned income of $3,400 and $300 of income from mowing lawns in the neighborhood. If the first $2,600 of Tom's net unearned income is taxed at 10%, what is Tom's 2019 income tax liability? a. $370 b. $260 c. $0 d. $459 e. None of these choices are correct. correct answer- b. $260 Which of the following itemized deductions may not be deducted in computing the individual alternative minimum tax? a. Medical expenses (limited to 10 percent of AGI) b. Charitable deductions c. State income taxes d. Qualified home mortgage interest e. All of these choices are correct. correct answer- c. State income taxes A taxpayer would be required to pay Social Security and Medicare taxes for a domestic employee in all but one of the following situations. In which situation would this not be required? a. A baby-sitter who earns $1,300 a year b. A cleaning lady who is paid $8,000 a year c. A cook who is paid $35,000 a year d. The taxpayer would not have to pay SocialSecurity and Medicare taxes in any of the above situations e. A nanny who earns $22,000 a year correct answer- a. A baby-sitter who earns $1,300 a year Denise is divorced and files a single tax return claiming her two children, ages 7 and 9, as dependents. Her AGI for 2019 is $81,500. Denise's child tax credit for 2019 is: a. $3,000 b. $1,000 c. $0 d. $2,000 e. $4,000 correct answer- e. $4,000 In 2019, the child tax credit available to married taxpayers filing jointly is phased out, beginning at: a. $110,000 b. $200,000 c. $400,000 d. $406,750 correct answer- c. $400,000 Which one of the following taxpayers qualify for the earned income credit in 2019? a. An 18-year-old college student who earns $8,000 at a part-time job. b. A single, 31-year-old construction worker with $22,000 of AGI and two children. c. A 70-year-old doctor whose practice had a net loss and who has an AGI of $5,000 d. A couple who have a combined AGI of $17,000 and three children but file separately. e. None of these qualifies for the earned income credit. correct answer- b. A single, 31- year-old construction worker with $22,000 of AGI and two children. The child and dependent care provisions: a. Are available only to single parents. b. Are available for the care of spouses incapable of self-care. c. Are allowed only for taxpayers earning less than $43,000. d. Apply only to children under age 15. correct answer- b. Are available for the care of spouses incapable of self-care. The American Opportunity tax credit a. Is fully refundable even if the credit exceeds the tax liability. b. Is available for qualifying expenses paid on behalf of the taxpayer and his or her spouse, in addition to those paid for dependents. c. Is 50 percent of the first $1,200 of tuition and fees paid and 100 percent of the next $1,200. d. Is available for 2 years of post-secondary education. correct answer- b. Is available for qualifying expenses paid on behalf of the taxpayer and his or her spouse, in addition to those paid for dependents. A tax credit is allowed for qualified adoption expenses paid by taxpayers: a. And an income exclusion is allowed for qualified adoption expenses paid for by taxpayers' employers. b. And an additional credit is allowed for qualified adoption expenses paid for by taxpayers' employers. c. And is not subject to a phase-out based on adjusted gross income. d. And is available each year qualifying expenses are incurred. correct answer- a. And an income exclusion is allowed for qualified adoption expenses paid for by taxpayers' employers. Which one of the following is true about Modified Accelerated Cost Recovery System (MACRS)? a. Buildings and autos both have the same depreciation life. b. A building is depreciated using 200 percent declining balance depreciation. c. A light duty business truck is depreciated using accelerated depreciation. d. All of these choices are false. correct answer- c. A light duty business truck is depreciated using accelerated depreciation. John purchases residential rental property on June 30, 2019 for a cost of $290,000. Of this amount, $140,000 is allocable to the cost of the home and the remaining $150,000 is allocable to the cost of the land. What is John's maximum depreciation deduction for 2019? a. $1,485 b. $2,758 c. $370 d. $1,061 e. None of these choices are correct. correct answer- b. $2,758 Which of the following is true about the MACRS depreciation system? a. Commercial real estate buildings are depreciated over 39 years using accelerated depreciation. b. No salvage value is used before depreciation percentages are applied to depreciable real estate. c. No matter when equipment is purchased during the month, it is considered to have been purchased mid-month for MACRS depreciation purposes. d. Residential rental buildings are depreciated straight-line over 20 years. correct answer- b. No salvage value is used before depreciation percentages are applied to depreciable real estate. A taxpayer places a $50,000 5-year recovery period asset in service in 2019. This is the only asset placed in service in 2019. Assuming half-year convention, no immediate expensing, what is the amount of bonus depreciation? a. $25,000 b. $50,000 c. $10,000 d. $0 e. None of these choices are correct. correct answer- b. $50,000 An asset (not an automobile) put in service in June 2019 has a depreciable basis of $535,000 and a recovery period of 5 years. Assuming bonus depreciation is used, a half-year convention, and no expensing election, what is the maximum amount of cost that can be deducted in 2019? a. $267,500 b. $107,000 c. $321,000 d. $374,500 e. $535,000 correct answer- e. $535,000 Section 197 intangibles: a. Are amortized over a 15-year period. b. Were defined in the Revenue Reconciliation Act of 1993. c. Include goodwill, going-concern value, and information bases. d. Are not amortized over the actual estimated useful life of the intangible asset. e. All of these choices are true. correct answer- e. All of these choices are true. Which of the following amounts paid by an employer to an employee is not subject to withholding? a. Commissions b. Travel expense reimbursements from an accountable plan c. Salary d. Bonus e. All of these choices are subject to withholding. correct answer- b. Travel expense reimbursements from an accountable plan Dividends paid to a shareholder by a corporation should be reported on which of the following forms? a. 1099-INT b. 1099-MISC c. 1099-R d. 1099-DIV e. None of these choices are correct. correct answer- d. 1099-DIV The FUTA tax is paid by: a. Employers only. b. Employees only. c. Employers and employees. d. Neither employers nor employees. e. The federal government. correct answer- a. Employers only. George has four employees who earned $75,000, $27,000, $2,100, and $6,200 during 2019, respectively. He paid 5.4 percent for state unemployment tax. How much FUTA tax will George owe for the four employees? a. $224.00 b. $882.40 c. $321.60 d. $133.80 e. $163.70 correct answer- d. $133.80 Which of the following is the most common type of audit for an individual taxpayer? a. Telephone audit b. Field audit c. Correspondence audit d. Office audit e. None of these choices are correct. correct answer- c. Correspondence audit Which of the following is not a possible result of an audit by the IRS? a. No change in the liability b. Payment of a deficiency by the taxpayer c. Payment of a refund to the taxpayer d. An appeal e. All of these choices are possible results. correct answer- e. All of these choices are possible results. If a calendar year taxpayer's 2019 individual income tax return is mailed on June 15, 2020, the statute of limitations would normally run out on: a. June 15, 2023 b. April 15, 2022 c. June 15, 2022 d. April 15, 2023 e. None of these choices are correct. correct answer- a. June 15, 2023 Which of the following statements is the most correct regarding The Taxpayer Bill of Rights? a. It explains the examination, appeal, collection, and refund process. b. It directs taxpayers to other IRS publications with more details on specific taxpayer rights. c. It states that a taxpayer is responsible for payment of only the correct amount of tax due, no more, no less. d. All of these statements are correct. e. None of these statements are correct. correct answer- d. All of these statements are correct. Which of the following is the best definition of tax planning? a. Planning taxpayers' financial affairs to find the best way to avoid tax by successfully bending tax law b. Planning taxpayers' financial affairs in an effort to minimize tax liability c. Preparing a client's tax return d. Researching complex tax issues e. None of these choices are considered tax planning. correct answer- b. Planning taxpayers' financial affairs in an effort to minimize tax liability Which of the following taxpayers will benefit most in terms of dollars saved as a result of tax planning to reduce taxes? a. An individual taxpayer who has a marginal tax rate of 24 percent. b. The taxpayers in a and b will benefit equally. c. An individual taxpayer who has an average tax rate of 32 percent d. An individual taxpayer who has a marginal tax rate of 32 percent. e. None of these choices are correct. correct answer- c. An individual taxpayer who has an average tax rate of 32 percent