Tax (Final Exam)
What are the three Accounting periods? - correct answer ✔✔-Calendar yr.
-Fiscal year (Ending last day of the month, other than December)
-52/53 week
What is the method for recognizing income under the accrual method? - correct answer ✔✔All events
have occurred and in reasonable amount.
When is the all events test met, assuming it can be reasonably determined? - correct answer ✔✔On the
earliest of:
-Payment for task due from customer
-Business receives payment
-When completing task required to earn income
Businesses must recognize prepayment income from rent and interest immediately upon receipt. T/F -
correct answer ✔✔True
What accounting method must you use for inventory? - correct answer ✔✔Accrual
For Accrual deductions, the business must meet what two parts? - correct answer ✔✔-All events test
-Economic performance
For goods expecting to be received, can deduct as long as goods are received _____ after the payment. -
correct answer ✔✔3.5 months
For deducting rental/leasing expenses, deduct _____. - correct answer ✔✔-Ratably
, What is the recurring item exception? - correct answer ✔✔-Liability expected to persist in future years,
all events test must be satisfied at year end, and actual economic performance must occur within a
reasonable time or within 8.5 months.
What is the 12 month rule? - correct answer ✔✔Immediately expenses that create benefits for a brief
period in time
-Contract not longer than a year
-Contract period does not extend beyond taxable year
What is the corporate tax formula? - correct answer ✔✔Realized Income
-(Deferrals/Exclusions & Cost of Goods Sold)
=Gross Income
-(Deductions)
=Taxable Income before special deductions
-(Special Deductions)
=Taxable Income
x Tax Rates
=Gross Tax
-(Credits/Payments & Other Taxes)
=Net Tax
Are life insurance proceeds deducted? - correct answer ✔✔No, they are included in tax exempt income.
What % of meals and entertainment can be deducted? And what must occur in order for these to be
deducted? - correct answer ✔✔-50%
-Written extemporaneous records detailing that business occurred.
Losses from the sale of business properties to related parties are deducted. TRUE/FALSE. - correct
answer ✔✔False
What are the three Accounting periods? - correct answer ✔✔-Calendar yr.
-Fiscal year (Ending last day of the month, other than December)
-52/53 week
What is the method for recognizing income under the accrual method? - correct answer ✔✔All events
have occurred and in reasonable amount.
When is the all events test met, assuming it can be reasonably determined? - correct answer ✔✔On the
earliest of:
-Payment for task due from customer
-Business receives payment
-When completing task required to earn income
Businesses must recognize prepayment income from rent and interest immediately upon receipt. T/F -
correct answer ✔✔True
What accounting method must you use for inventory? - correct answer ✔✔Accrual
For Accrual deductions, the business must meet what two parts? - correct answer ✔✔-All events test
-Economic performance
For goods expecting to be received, can deduct as long as goods are received _____ after the payment. -
correct answer ✔✔3.5 months
For deducting rental/leasing expenses, deduct _____. - correct answer ✔✔-Ratably
, What is the recurring item exception? - correct answer ✔✔-Liability expected to persist in future years,
all events test must be satisfied at year end, and actual economic performance must occur within a
reasonable time or within 8.5 months.
What is the 12 month rule? - correct answer ✔✔Immediately expenses that create benefits for a brief
period in time
-Contract not longer than a year
-Contract period does not extend beyond taxable year
What is the corporate tax formula? - correct answer ✔✔Realized Income
-(Deferrals/Exclusions & Cost of Goods Sold)
=Gross Income
-(Deductions)
=Taxable Income before special deductions
-(Special Deductions)
=Taxable Income
x Tax Rates
=Gross Tax
-(Credits/Payments & Other Taxes)
=Net Tax
Are life insurance proceeds deducted? - correct answer ✔✔No, they are included in tax exempt income.
What % of meals and entertainment can be deducted? And what must occur in order for these to be
deducted? - correct answer ✔✔-50%
-Written extemporaneous records detailing that business occurred.
Losses from the sale of business properties to related parties are deducted. TRUE/FALSE. - correct
answer ✔✔False
