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10 Multi choice tax questions

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Practice problems, see file attached.

Question 1: Merle furnishes more than 50% of the support of her son and daughter-in-law, who live with her. If the son and daughter-in-law file a joint return, then Merle might be able to claim them as dependents under certain circumstances.
A. True
B. False

Question 2: Albert is in the 33 percent marginal tax bracket. On a particular Saturday, he had planned to paint a room in his house, but his employer requested that he work that day. Because Albert had to work, it was necessary for him to hire a painter. By working and hiring a painter, Albert will:
A. Have an after-tax economic loss if his employer pays him $200 and the painter charges $120 for labor.
B. Have an after-tax economic gain if his employer pays him $180 and the painter charges $140 for labor.
C. Have an after-tax economic loss if his employer pays him $150 and the painter charges $100 for labor.
D. Have an after-tax economic gain if his employer pays him $200 and the painter charges $120 for labor.
E. None of the above.

Question 3: Tommy is an automobile mechanic who works for an auto dealership, but he is considering opening a fast food franchise. If Tommy decides not to acquire the fast food franchise, the investigation expenses are:
A. Classified as a deduction for AGI
B. Classified as a deduction from AGI, subject to the 2 percent floor
C. Classified as a deduction from AGI, not subject to the 2 percent floor
D. Not deductible
E. None of the above

Question 4: Earl entertains one of his clients on January 1 of the current year. Expenses paid by Earl are as follows:
Cab fare $ 22
Cover charge at supper club 40
Dinner at club 190
Tips to waiter 38
Presuming proper substantiation, Earl's deduction is:
A. $126
B. $136
C. $145
D. $156
E. None of the above

Question 5: For purposes of computing the deduction for qualified residence interest, a qualified residence includes the taxpayer's principal residence and one other residence of the taxpayer or spouse.
A. True
B. False

Question 6: Ken's AGI is $90,000. He contributed $72,000 in cash to a public charity. What is Ken's charitable contribution deduction for AMT purposes?
A. $18,000
B. $27,000
C. $45,000
D. $70,000
E. None of the above

Question 7: Carol has a tentative general business credit of $110,000 for 2007. Her net income tax is $125,000, her net regular tax liability before the general business credit is $125,000, and her tentative minimum tax is $100,000. She has no other tax credits. What is Carol's allowable general business credit for the year?
A. $110,000
B. $15000
C. $100,000
D. $25,000
E. None of the above

Question 8: Which of the following decreases adjusted basis?
A. Amortization of bond premium
B. A corporate distribution to a shareholder treated as a return of capital in which gain is recognized to the shareholder
C. Depreciation
D. Only A and B
E. A, B, and C

Question 9: Rea is a songwriter. She wrote a song, copyrighted it, and sold it for $10,000 cash. The song had a zero tax basis. The purchaser was a national song brokerage company. Rea is in the business of songwriting. The $10,000 received by Rea is:
A. Long-term capital gain
B. Short-term capital gain
C. Ordinary income
D. Excludible from gross income
E. None of the above

Question 10: Jerome is considering making a $30,000 investment in a venture which its promoter promises will generate immediate tax benefits for him. Jerome, who does not anticipate itemizing his deductions, is in the 33% marginal tax bracket. If the investment is of a type that produces a tax credit of 40% of the amount of the expenditure, by how much will Jerome's tax liability decline because of the investment?
a. $-0-.
b. $9,000.
c. $12,000.
d. $30,000.
e. None of the above.

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Solution Summary

The solution contains a paragraph in answer to each question which will include calculations, if necessary, to solve the problem.

See Also This Related BrainMass Solution

10 Multiple Choice Accounting questions - physical inventory, FIFO, LIFO, outstanding checks, Doubtful Accounts, matching principle, previously written off account, bad debt expense, annual depreciation rate, loss on disposal of a plant asset

1. After the physical inventory is completed,
A) quantities are listed on inventory summary sheets.
B) quantities are entered into various general ledger inventory accounts.
C) the accuracy of the inventory summary sheets is checked by the person listing the quantities on the sheets.
D) unit costs are determined by dividing the quantities on the summary sheets by the total inventory costs.

2. The manager of Worley is given a bonus based on net income before taxes. The net income after taxes is $5,600 for FIFO and $4,900 for LIFO. The tax rate is 30%. The bonus rate is 20%. How much higher is the manager's bonus if FIFO is adopted instead of LIFO?
A) $250
B) $140
C) $200
D) $700

3. Jones Company had checks outstanding totaling $5,400 on its June bank reconciliation. In July, Jones Company issued checks totaling $38,900. The July bank statement shows that $26,300 in checks cleared the bank in July. A check from one of Jones Company's customers in the amount of $300 was also returned marked "NSF." The amount of outstanding checks on Davis Company's July bank reconciliation should be
A) $12,600.
B) $18,000.
C) $17,700.
D) $7,200.

4. The account Allowance for Doubtful Accounts is classified as a(n)
A) liability.
B) contra account of Bad Debt Expense.
C) expense.
D) contra account to Accounts Receivable.

5. The matching principle
A) requires that all credit losses be recorded when an individual customer cannot pay.
B) necessitates the recording of an estimated amount for bad debts.
C) results in the recording of a known amount for bad debt losses.
D) is not involved in the decision of when to expense a credit loss.

6. If an account is collected after having been previously written off
A) the allowance account should be debited.
B) only the control account needs to be credited.
C) both income statement and balance sheet accounts will be affected.
D) there will be both a debit and a credit to accounts receivable.

7. Using the allowance method, the uncollectible accounts for the year is estimated to be $28,000. If the balance for the Allowance for Doubtful Accounts is a $7,000 credit before adjustment, what is the amount of bad debt expense for the period?
A) $7,000
B) $21,000
C) $28,000
D) $35,000

8. A truck was purchased for $18,000 and it was estimated to have a $3,000 salvage value at the end of its useful life. Monthly depreciation expense of $250 was recorded using the straight-line method. The annual depreciation rate is
A) 25%.
B) 2%.
C) 16%.
D) 20%.

9. A truck that cost $12,000 and on which $10,000 of accumulated depreciation has been recorded was disposed of for $3,000 cash. The entry to record this event would include a
A) gain of $1,000.
B) loss of $1,000.
C) credit to Truck account for $3,000.
D) credit to Accumulated Depreciation for $10,000.

10. A loss on disposal of a plant asset is reported in the financial statements
A) in the Other Revenues and Gains section of the income statement.
B) in the Other Expenses and Losses section of the income statement.
C) as a direct increase to the capital account on the balance sheet.
D) as a direct decrease to the capital account on the balance sheet.

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