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- Which of the following is an acceptable method of accounting under the tax law? The accrual method The hybrid method The cash method All of the above are acceptable None of the aboveStatement 1: Deductions for business expenses for the taxable periods are those that benefit all accounting or taxable periods of the taxpayer. Statement 2: Capital expenditures are those that affect or benefit future accounting periods. * a. Both statements are true b. Both statements are false c. Only statement 1 is true d. Only statement 2 is trueSome items are treated as a deduction for tax purposes when they are paid but are recognised as expenses when they are accrued for accounting purposes. Which of the following items are of that type? a. Warranty costs b. Goodwill impairment c. Fines d. Entertainment expenses e. Prepaid insurance
- Under the cash method of tax accounting, tax deductions are taken when: a, Expenditures are made b, There is a fixed and determinable liability c, The taxpayer elects to take the deduction d, None of the aboveStatement 1: Exclusions pertain to the computation of gross income, while deductions pertain to the computation of net income. Statement 2: Exclusions are something received or earned by the taxpayer which do not form part of taxable gross income, while deductions are something spent or paid in earning gross income. a. Both statements are true b. Both statements are false c. Only statement 1 is true d. Only statement 2 is true1.The definition of gross income in the tax law is: A. All items specifically listed as income in the tax law B. All cash payments received for goods provided and services performed C. All income from whatever source derived D. All income from whatever source derived unless the income is earned illegally 2.Which of the following is not taxable for income tax purposes? A.Prizes B.Severance pay C.Gifts D.Partnership income E.All of the above are taxable 3.All of the following items are taxable to the taxpayer receiving them, except: A.Life insurance proceeds B.Unemployment compensation C.Embezzled funds D.Prizes E.Gambling winnings
- 1st Statement A taxpayer's tax exempt status justifies the non-keeping of books of accounts & other accounting records. 2nd Statement Fiscal tax and regulatory tax are the same True, True False, False False, True True, FalseIn cash basis accounting, for tax purposes: a.Income is generally recognized when it is actually or constructively received and expenses are generally recognized when they are paid. b.Income is recognized when it is earned regardless of when received and expenses are recognized when they are actually or constructively incurred. c.The cash basis is not allowed for businesses reported on Schedule C. d.Income is recognized when it is actually or constructively received and expenses are recognized when they are actually or constructively incurred, regardless of when paid.Statement 1: Life insurance premiums shall be reported as a deductible expense for financial reporting purposes if the company paying it is the beneficiary. Statement 2: Life insurance premiums shall be reported as a deductible expense for taxation purposes if the company paying it is the beneficiary. Statement 3: The total income tax expense can be computed as financial income multiplied by the tax rate. Statement 4: Future taxable amounts should be deducted in determining the taxable income which will yield the deferred tax asset. Statement 5: Future deductible amounts should be deducted in determining the taxable income. Which statement/s are true?
- In Step 1 the income tax expense of $8,750,000 is correct. The deferred tax liability and income tax payable are incorrect. In Step 2 the net income is correct.f a business owner paid for the business expenses with their personal account, and those expenses would otherwise be deductible, they: A. CANNOT be deducted on the tax return because they weren't paid for from a business account. B. CAN be included on the tax return as long as proof of the expenses is sent with the return. C. CAN be deducted on the tax return. D. CANNOT be deducted because the IRS requires separate business and personal bank accounts.1. Indicate whether the following expenditures are trade or business deductions (T), production of income deductions (PI), personal deductions (P), or are not deductible (X). Also indicate if the deductible expenditures are deductible “for” or “from” AGI. a. Interest expense on business loan b. Expenses incurred in an activity lacking a true profit motive (i.e., a hobby activity) c. Commuting expenses of individual taxpayer d. Rent payments paid by an illegal gambling business e. Payment by a business to bribe a government official
