ACCT 324 Week 4 Midterm Exam Answers

ACCT 324 Week 4 Midterm Exam Answers
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ACCT 324 Week 4 Midterm Exam Answers
1. Question : (TCO 9) In terms of probability, which of the following taxpayers would least
likely be audited by the IRS?
2. Question : (TCO 9) A characteristic of fraud penalties is:
3. Question : (TCO 1) Federal tax legislation generally originates in what body?
4. Question : (TCO 1) Subchapter S covers which specific area of tax law?
5. Question : (TCO 11) Kyle, whose wife died in December 2009, filed a joint tax return for
2009. He did NOT remarry, but has continued to maintain his home in which his two
dependent children live. What is Kyle’s filing status regarding 2012?
6. Question : (TCO 11) Arnold is married to Sybil, who abandoned him in 2008. He has
NOT seen or communicated with her since April of that year. He maintains a household
in which their son, Evans, lives. Evans is age 25 and earns over $20,000 each year. For
tax year 2011, Arnold’s filing status is:
7. Question : (TCO 7) Orange Cable TV Company, an accrual basis taxpayer, allows its
customers to pay by the year in advance ($350 per year), or two years in advance ($680).
In September 2011, the company collected the following amounts applicable to future
services:
8. Question : (TCO 7) With respect to the prepaid income from services, which of the
following is true?
9. Question : (TCO 3) Section 119 excludes the value of meals from the employees’ gross
income:
10. Question : (TCO 3) Adam repairs power lines for the Egret Utilities Company. He is
generally working on a power line during the lunch hour. He must eat when and where he
can and still get his work done. He usually purchases something at a convenience store
and eats in his truck. Egret reimburses Adam for the cost of his meals.
11. Question : (TCO 10) On June 1, 2010, Irene places in service a new automobile that cost
$21,000. The car is used 70% for business and 30% for personal use (Assume that this

percentage is maintained for the life of the car.). She does NOT elect to take additional
first-year depreciation. Determine the cost recovery deduction for 2011.
12. Question : (TCO 10) Which of the following is correct?
13. Question : (TCO 10) On May 2, 2011, Karen places in service a new sports utility vehicle
that costs $70,000 and has a gross vehicle weight of 6,300 lbs. The vehicle is used 40%
for business and 60% for personal use. Determine the cost recovery deduction for 2011.
14. Question : (TCO 10) Danielle owns a vacation cottage. During the current year, she
rented it for $1,500 for 48 days, and lived in it for 12 days. How would any expenses be
accounted for?
15. Question : (TCO 3) During the year, Rick had the following insured personal casualty
losses (arising from one casualty). Rick also had $18,000 AGI for the year.
16. Question : (TCO 3) John had adjusted gross income of $60,000. During the year, his
personal use summer home was damaged by a fire. Pertinent data with respect to the
home follows:
17. Question : (TCO 3) Jim purchases a ticket for $80 for a special concert by the symphony
(a qualified charity). If the price of a ticket is normally $25, what is the amount allowed
as a charitable deduction?
18. Question : (TCO 3) Karen, a calendar year taxpayer, made the following donations to
qualified charitable organizations in the current year:
19. Question : (TCO 3) This year, Ralph made the following contributions to the University
of the Northwest (a qualified charitable organization):
20. Question : (TCO 3) Several years ago, Joy acquired a passive activity. Until 2008, the
activity was profitable. Joy’s at-risk amount at the beginning of 2008 was $250,000. The
activity produced losses of $100,000 in 2008, $80,000 in 2009, and $90,000 in 2010.
During the same period, no passive income was recognized. How much is suspended
under the at-risk rules and the passive loss rules at the beginning of 2011?
21. Question : (TCO 3) Wes’ at-risk amount in a passive activity is $25,000 at the beginning
of the current year. His current loss from the activity is $35,000, and he has no passive
activity income. At the end of the current year, which of the following statements is
incorrect?
22. Question : (TCO 2) The installment method applies to which of the following sales with
payments being made in the year following the year of sale?
23. Question : (TCO 2) In 2010, Helen sold property and reported her gain by the installment
method. Her basis in the property was $150,000 ($250,000 cost less $100,000 of

depreciation). Helen sold the property for $375,000, with $75,000 due on the date of the
sale and $300,000 (plus interest at the federal rate) due in 2011. Helen’s recognized
installment sale gain in 2011 is:
24. Question : (TCO 2) Todd, a CPA, sold land for $200,000 plus a note for $400,000. The
interest rate on the note was equal to the federal rate. The fair market value of the note
was $360,000. Todd’s basis in the land was $75,000.
25. Question : (TCO 2) Both economic and social considerations can be used to justify:
26. Question : (TCO 3) Joe’s automobile, which was used only for business purposes, was
damaged in an accident. At the date of the accident, the fair market value of the
automobile was $13,000 and its adjusted basis was $7,000. After the accident, the
automobile was appraised at $4,000. Calculate Joe’s loss. Is it a for or from AGI
deduction?
27. Question : (TCO 1) In 2010, David had the following transactions: