ACCT 553 Federal Taxes and Management Decisions Entire Course
ACCT 553 Week 1 Homework
ACCT 553 Week 2 Homework
ACCT 553 Week 3 Homework
ACCT 553 Week 3 Quiz.docx
ACCT 553 Week 4 Homework
ACCT 553 Week 4 You Decide .
ACCT 553 Week 5 Homework
ACCT 553 Week 5 Quiz.docx
ACCT 553 Week 6 Homework
ACCT 553 Week 6 You Decide .
ACCT 553 Week 7 Homework
ACCT 553 Midterm Exam
ACCT 553 Final Exam
ACCT 553 Week 1 Homework
Chapter 1 (5 pts)
- Briefly discuss the purpose of the Sixteenth Amendment
Chapter 2 (5 pts)
- Explain the two ‘safe harbors’ available to an Individual taxpayer to avoid a penalty for underpayment of estimated tax.
Chapter 3 (5 pts)
- Explain the distinction between an ‘above the line’ deduction (i.e. FOR AGI) and a below the line deduction (i.e. FROM AGI). Which one is more valuable?
Chapter 13 (5 pts)
- What is an Installment Sale? Is it a form of income ‘deferral’ ? Whencan’tyou elect this form of reporting?
ACCT 553 Week 2 Homework
- Your brother is short on cash and cannot pay his rent this month. You pay his rent for him. Is this taxable income to your brother? Do you get a deduction? (2 pts)
- Which of the following items would beexcludedfrom income? (a) $100 bill found under the sugar caddy at the restaurant (b) Inheritance of a car from your grandmother valued at $5,000. (c) Loan from your father-in-law to start your business, (d) Child Support received totaling $16,500. (4 pts)
- Shaun & Kayla earned the following in 2013: Interest on a Savings account of $36, Interest on a U.S. Series EE Savings Bond of $25, Interest on a CD that has not matured yet of $20. How much taxable interest income must they report on their 2013 tax return? (4 pts)
- Explain what a Cafeteria Plan is (hint: it has nothing to do with what you eat between classes 🙂 ). (5 pts)
- Explain the limitations placed on the deductibility of Business Gifts? What code section dictates this treatment? (5 pts)
ACCT 553 Week 3 Homework
- In your ‘own’ words, please describe what a ‘Suspended Loss’ is, how it is generated and when it is becomes deductible. (5 pts)
- Please describe ‘Active Participation’ as it relates to a taxpayer’s involvement in an investment in Real Estate. (5 pts).
- Macy had a lot of medical expenses this year that were not covered by her insurance (either due to a deductible, co-insurance, or co-pay). Her un-reimbursed qualifying medical expenses total $8,356 and her AGI for 2013 is $45,000. Assuming she will itemize on her 2013 tax return, how much of her medical expenses will she be able to deduct? (5 pts)
- Heather & Terry have a mortgage on their primary residence of $750,000 and a mortgage on their vacation home of $410,000. In 2013, they incurred $46,400 of mortgage interest expense. How much, if any, of that interest is deductible on Schedule A? (5 pts)
ACCT 553 Week 3 Quiz
- (TCO A) A taxpayer may litigate a tax dispute without first paying the tax in the:
- (TCO F) A business bad debt is deductible for tax purposes as a(n):
- (TCO I) Under the cash method of tax accounting, tax deductions are generally taken when:
- (TCO A) Which of the following constitutes tax evasion?
- (TCO C) Which of the following items is not subject to federal income tax?
- (TCO B) Sam owes Bob $8,000. Bob cancels (forgives) the debt. The cancellation is not a gift, and Sam is bankrupt. Which of the following statements is correct concerning the impact of this transaction?
- (TCO I) Johnny, a cash basis taxpayer, owns two rental properties. Based on the following information, compute the amount that he must include in his 2012 gross rental income.
- (TCO F) Section 197’s intangible assets, such as patents and trademarks, are amortized for tax purposes over:
- (TCO E) Explain the constructive receipt doctrine.
- (TCO G) Answer the following questions concerning the sources of tax law.
ACCT 553 Week 4 Homework
- Please describe the concept of ‘double taxation’ and discuss which entity(ies) are subject to this type of taxation. (5 pts)
- What type of taxpayers are considered ‘eligible’ taxpayers with regard to special ordinary loss treatment of IRC Section 1244 stock? (5 pts.)
- Please describe how the treatment of capital gains(losses) differ for a C Corporation as compared to an Individual. ( 5 pts.)
- Please describe the concept of ‘Depreciation recapture’. ( 5 pts.)
ACCT 553 Week 4 You Decide
Jane Smith Case
How is the $300,000 treated for purposes of federal tax income?
Jane Smith Tax Issues:
(a) What are the different tax consequences between paying down the mortgage debt and assuming a new mortgage debt for federal income tax purposes?
(a) Should John and Jane file separate or joint tax returns?
ACCT 553 Week 5 Homework
- Please explain how Charitable Contributions come into play in determining ‘Corporate’ taxable income. (5 pts)
- What happens to a loss on the Corporate Tax Return (Form 1120)? Does it pass through to the shareholders? Is it available for future or past periods? Please explain in detail. (5 pts.)
- Please describe the purpose of Sch3edules M-1 and M-3. When is a Schedule M-3 required in lieu of a Schedule M-1. (5 pts.)
- Please define and differentiate a Spin-off, Split-off, and Split-up. ( 5 pts.)
ACCT 553 Week 5 Quiz
- (TCO E) For federal tax purposes, royalty income not derived in the ordinary course of a business is classified as:
- (TCO F) When comparing corporate and individual taxation, the following statements are true, except:
- (TCO H) Al and Amy file a joint return for the 2012 tax year. Their adjusted gross income is $80,000. They had a net investment income of $8,000. In 2012, they had the following interest expenses:
Personal credit card interest: $4,000
Home mortgage interest: $8,000
Investment interest (on loans used to buy stocks): $10,000
- (TCO B) Charitable contribution deductions for capital gains property made by individuals without a reduction for long-term capital gains to public charities are limited to:
- (TCO A) The following taxes were paid by Tim:
Real estate taxes on his home: $2,000
State income taxes: $900
State gasoline tax (personal use of automobile): $150
- (TCO F) Hoover, Inc. had gross receipts from operations of $230,000, operating and other expenses of $310,000, and dividends received from a 45 percent-owned domestic corporation of $120,000. Hoover’s tax position for the year is:
- (TCO G) All of the outstanding stock of a closely held C corporation is owned equally by David Smith and Steve Bufusno. In 2012, the corporation generates taxable income of $30,000 from its active business activities. In addition, it earns $20,000 of interest from investments and incurs a $40,000 loss from a passive activity. How much income does the C corporation report for 2012?
- (TCO G) Mike, who is single, has $100,000 of salary, $15,000 of income from a limited partnership, and a $30,000 passive loss from a real estate rental activity in which he actively participates. His modified adjusted gross income is $100,000. Of the $30,000 loss, how much is deductible?
- (TCO F) Pam owns a sole proprietorship, and Kevin is the sole shareholder of a C (regular) corporation. Each business sustained a $16,000 operating loss and a $2,500 capital loss for the year. Evaluate how these losses will affect the taxable income of the two owners?
- (TCO G) Briefly (1) define and (2) discuss the purpose and impact of each of the following:
- net operating loss
b. at-risk rules
- tax shelter
ACCT 553 Week 6 Homework
- Miyasyke, Inc., a calendar year S corporation, has five equal shareholders at the end of the tax year. Miyasyke had
$75,000 of taxable income. Miyasyke made distributions to its shareholders of $32,000 each, for a total of $160,000. Each shareholder’s basis in the S corporation is $100,000 at the beginning of the tax year. What amount from Miyasyke should be included in each shareholder’s gross income?
For which of the following entities is the owner’s basis increased by the owner’s share of profits and decreased by the owner’s share of losses, but is not affected by the entity’s bank loan increases or decreases?
ACCT 553 Week 6 You Decide
Mark, and John Case
Part I: Discuss the various forms of organization that are available to Penelope, Mark, and John
Part II: Make your recommendation as to what form of organization you believe will be best, and be sure to explain the reasoning for your choice.
Part III: Discuss the tax consequences of contributing cash, property, and/or services to the new entity.
ACCT 553 Week 7 Homework
- Please explain the distinction between a ‘realized’ gain and a ‘recognized’ gain. (5 pts)
- Are there any limits to the deductibility of losses on sales and exchanges between related parties? What code section defines this limitation? (5 pts.)
- What is the basis of property received (i.e. new property) in a like-kind exchange? What is the holding period for the new asset? (5 pts.)
- David purchased stock in Zoll Corporation in 1985 for $6,000. On April 16, 2013 he gifted the stock to his daughter Susan; at the time of the gift, the Zoll stock was valued at $250,000. Susan sold the stock the next month for $ 252,000. What is Susan’s gain or loss and what is the character of the gain or loss? ( 5 pts.)
ACCT 553 Midterm
- (TCO C) Under current accounting practice, intangible assets are classified as (Points: 5)
amortizable or unamortizable.
limited-life or indefinite-life.
specifically identifiable or goodwill-type.
legally restricted or goodwill-type.
- (TCO C) Which of the following intangible assets should not be amortized? (Points: 5)
All of these intangible assets should be amortized.
- (TCO C) The intangible asset goodwill may be (Points: 5)
capitalized only when purchased.
capitalized either when purchased or created internally.
capitalized only when created internally.
written off directly to retained earnings.
- (TCO C) ELO Corporation purchased a patent for $90,000 on September 1, 2008. It had a useful life of ten years. On January 1, 2010, ELO spent $22,000 to successfully defend the patent in a lawsuit. ELO feels that as of that date, the remaining useful life is five years. What amount should be reported for patent amortization expense for 2010? (Points: 5)
- (TCO C) During 2011, Bond Company purchased the net assets of May Corporation for $1,000,000. On the date of the transaction, May had $300,000 of liabilities. The fair value of May’s assets when acquired were as follows:
How should the $500,000 difference between the fair value of the net assets acquired ($1,500,000) and the cost ($1,000,000) be accounted for by Bond? (Points: 5)
The $500,000 difference should be credited to retained earnings.
The $500,000 difference should be recognized as a gain.
The current assets should be recorded at $540,000 and the noncurrent assets should be recorded at $760,000.
A deferred credit of $500,000 should be set up and then amortized to income over a period not to exceed forty years.
- (TCO D) Which of the following is a condition for accruing a liability for the cost of compensation for future absences? (Points: 5)
The obligation relates to the rights that vest or accumulate.
Payment of the compensation is probable.
The obligation is attributable to employee services already performed.
All of these are conditions for the accrual.
- (TCO D) Which of the following taxes does not represent a payroll deduction a company may incur? (Points: 5)
Federal income taxes.
State unemployment taxes.
State income taxes.
- (TCO D) Assume that a manufacturing corporation has (1) good quality control, (2) a one-year operating cycle, (3) a relatively stable pattern of annual sales, and (4) a continuing policy of guaranteeing new products against defects for three years that has resulted in material but rather stable warranty repair and replacement costs. Any liability for the warranty (Points: 5)
should be reported as long-term.
should be reported as current.
should be reported as part current and part long-term.
need not be disclosed.
- (TCO D) Jenkins Corporation has $2,500,000 of short-term debt it expects to retire with proceeds from the sale of 75,000 shares of common stock. If the stock is sold for $20 per share subsequent to the balance sheet date, but before the balance sheet is issued, what amount of short-term debt could be excluded from current liabilities? (Points: 5)
- (TCO D) Tender Foot Inc. is involved in litigation regarding a faulty product sold in a prior year. The company has consulted with its attorney and determined that it is possible that they may lose the case. The attorneys estimated that there is a 40% chance of losing. If this is the case, their attorney estimated that the amount of any payment would be $500,000. What is the required journal entry as a result of this litigation? (Points: 5)
Debit Litigation Expense for $500,000 and credit Litigation liability for $500,000.
No journal entry is required.
Debit Litigation Expense for $200,000 and credit Litigation Liability for $200,000.
Debit Litigation Expense for $300,000 and credit Litigation Liability for $300,000.
- (TCO D) If bonds are initially sold at a discount and the straight-line method of amortization is used, interest expense in the earlier years will (Points: 5)
exceed what it would have been had the effective-interest method of amortization been used.
be less than what it would have been had the effective-interest method of amortization been used.
be the same as it would have been had the effective-interest method of amortiza-tion been used.
be less than the stated (nominal) rate of interest.
- (TCO D)When the interest payment dates of a bond are May 1 and November 1, and a bond issue is sold on June 1, the amount of cash received by the issuer will be (Points: 5)
decreased by accrued interest from June 1 to November 1.
decreased by accrued interest from May 1 to June 1.
increased by accrued interest from June 1 to November 1.
increased by accrued interest from May 1 to June 1.
- (TCO D) Feller Company issues $20,000,000 of ten-year, 9% bonds on March 1, 2010 at 97 plus accrued interest. The bonds are dated January 1, 2010, and pay interest on June 30 and December 31. What is the total cash received on the issue date? (Points: 5)
- (TCO D) A company issues $20,000,000, 7.8%, 20-year bonds to yield 8% on January 1, 2010. Interest is paid on June 30 and December 31. The proceeds from the bonds are $19,604,145. What is interest expense for 2011, using straight-line amortization? (Points: 5)
- (TCO D) On January 1, Patterson Inc. issued $5,000,000, 9% bonds for $4,695,000. The market rate of interest for these bonds is 10%. Interest is payable annually on December 31. Patterson uses the effective-interest method of amortizing bond discount. At the end of the first year, Patterson should report unamortized bond discount of (Points: 5)
(TCO C) Sisco Co. purchased a patent from Thornton Co. for $180,000 on July 1, 2008. Expenditures of $68,000 for successful litigation in defense of the patent were paid on July 1, 2011. Sisco estimates that the useful life of the patent will be 20 years from the date of acquisition.
Prepare a computation of the carrying value of the patent at December 31, 2011.
Amortization (2008) = $180,000 / 20 years x 6/12 = $4,500
Amortization (2009 – 2010) = $180,000 / 20 years x 2 = $18,000
Amortization (2011) = ($180,000 / 20 years) + ($68,000 / 17 years x 6/12) = $11,000
Carrying Value = $180,000 + $68,000 – $4,500 – $18,000 – $11,000 = $214,500
(TCO C) Fred’s Company is considering the write-off of a limited life intangible asset because of its lack of profitability. Explain to the management of Fred’s how to determine whether a writeoff is permitted.
- (TCO D) Edwards Co. includes one coupon in each bag of dog food it sells. In return for four coupons, customers receive a dog toy that the company purchases for $1.20 each. Edwards’s experience indicates that 60 percent of the coupons will be redeemed. During 2010, 100,000 bags of dog food were sold, 12,000 toys were purchased, and 40,000 coupons were redeemed. During 2011, 120,000 bags of dog food were sold, 16,000 toys were purchased, and 60,000 coupons were redeemed.
Determine the premium expense to be reported in the income statement and the estimated liability for premiums on the balance sheet for 2010 and 2011.
Premium Expense = 100,000 bags / 4 coupons x 60% x $1.20 = $18,000
Estimated Liability = $18,000 – (40,000 coupons / 4 coupons x $1.20) = $6,000
Premium Expense = 120,000 bags / 4 coupons x 60% x $1.20 = $21,600
Estimated Liability = $6,000 + $21,600 – (60,000 coupons / 4 coupons x $1.20) = $9,600
- (TCO D) Grider Industries, Inc. issued $6,000,000 of 8% debentures on May 1, 2010 and received cash totaling $5,323,577. The bonds pay interest semiannually on May 1 and November 1. The maturity date on these bonds is November 1, 2018. The firm uses the effective-interest method of amortizing discounts and premiums. The bonds were sold to yield an effective-interest rate of 10%.
Calculate the total dollar amount of discount or premium amortization during the first year (5/1/10 through 4/30/11) these bonds were outstanding. (Show computations and round to the nearest dollar.)
Discount Amortization (1st Interest Payment) = ($5,323,577 x 10% x 6/12) – ($6,000,000 x 8% x 6/12) = $26,179
Discount Amortization (2nd Interest Payment) = [($5,323,577 + $26,179) x 10% x 6/12] – ($6,000,000 x 8% x 6/12) = $27,488
Total Discount Amortized (5/1/10 – 4/30/11) = $26,179 + $27,488 = $53,667
- (TCO D) Hurst, Incorporated sold its 8% bonds with a maturity value of $3,000,000 on August 1, 2009 for $2,946,000. At the time of the sale, the bonds had five years until they reached maturity. Interest on the bonds is payable semiannually on August 1 and February 1. The bonds are callable at 104 at any time after August 1, 2011. By October 1, 2011, the market rate of interest has declined and the market price of Hurst’s bonds has risen to a price of 101. The firm decides to refund the bonds by selling a new 6% bond issue to mature in five years. Hurst begins to reacquire its 8% bonds in the market and is able to purchase $500,000 worth at 101. The remainder of the outstanding bonds is reacquired by exercising the bonds’ call feature. In the final analysis, how much was the gain or loss experienced by Hurst in reacquiring its 8% bonds? (Assume the firm used straight-line amortization.) Show calculations.
ACCT 553 Final Exam
- (TCO E) Zelda Zayer has been a widow for over 3 years and files a return as a single taxpayer. Items of income received by Zelda in 2011 were as follows.
Interest on savings account with Bank of America: $50
Interest on state income tax refund: $25
Gambling winnings: $2,400
Dividends from mutual life insurance company on life insurance policy: $500
Dividends from Better Auto Co. received on January 2, 2011: $875
The total dividends received on the life insurance policy do not exceed the aggregate of the premiums paid to the company.
(a) How much should Zelda include in her 2011 taxable income as interest?
(b) How much should Zelda report as dividend income for 2011?
(c) How much should Zelda include in taxable “Other Income” for her state lottery winnings?
- (TCO E) Distinguish between realized gains and losses and recognized gains and losses.(Points : 17)
- (TCO F) Describe the current tax law for sale of residence.(Points : 17)
- (TCO G) Briefly describe what ‘material participation’ is. Why is the determination of whether a taxpayer materially participates important?(Points : 17)
- (TCO I) Amos, a single individual with a salary of $50,000, incurred and paid the following expenses during the year.
Medical expenses: $5,000
Casualty loss (after $100 floor): $1,000
State income taxes: $4,000
Moving expenses: $1,500
Contribution to a traditional IRA: $2,000
Student loan interest: $1,200
Analyze the above expenses and determine which ones are deductible for AGI. Please support your position.(Points : 17)
- (TCO I) A review of Bearing’s Year 2 records disclosed the following tax information:
|Taxable interest and qualifying dividends
|Schedule C trucking business net income
|Rental (loss) from residential property
|Limited partnership (loss)
Bearing actively participated in the rental property and was a limited partner in the partnership. Bearing had sufficient amounts at risk for the rental property and the partnership. What is Bearing’s Year 2 adjusted gross income?
- (TCO F) (Becker CPA Review Course, Reg. 1) Smith has an adjusted gross income (AGI) of $140,000 without taking into consideration $40,000 of losses from rental real estate activities. Smith actively participates in the rental real estate activities. What amount of the rental losses may Smith deduct in determining taxable income?(Points : 17)
- (TCO B) (Becker CPA Review Course Reg. 3) For the year ended December 31, Year 6, Taylor Corp. had a net operating loss of $200,000. Taxable income for the earlier years of corporate existence, computed without reference to the net operating loss, was as follows:
Year 1 $ 5,000
Year 2 10,000
Year 3 20,000
Year 4 50,000
Year 5 50,000
What amount of net operating loss will be available to Taylor for the year ended December 31, Year 7?(Points : 17)
- (TCO F) (Becker CPA Review Exam Reg. 1) Randolph is a single individual who always claims the standard deduction. Randolph received the following in the current year:
|Pension distribution (100% taxable)
|A state tax refund from the previous year
What is Randolph’s gross income?(Points : 17)
- (TCO H) Alex Smith purchased 30 shares of XYZ stock on April 30, 2010 for $210, and on September 1, 2010, he purchased 90 additional shares for $900. On November 8, 2010, he sold 48 shares, which could not be specifically identified, for $528, and on December 15, 2010, he sold another 25 shares for $50. What is his recognized gain or loss?(Points : 17)