A taxpayer is single, graduated college, and is now repaying her student loans. She paid $2,800 in interest on her loans in 2012. Her MAGI before considering any student loan interest deduction is $67,500. How much of an above-the-line deduction can she claim? a. Incorrect. She would be allowed no interest deduction if her MAGI exceeded $75,000, which it did not. b. Correct. Because her […]

Which taxpayer does not qualify as an educator for purposes of deducting educator expenses up to $250? a. Correct. A parent who home-schools her child is not treated as an educator, even if he or she spends more than 900 hours a year. b. Incorrect. A principal is specifically listed as a qualified educator for grades K–12. c. Incorrect. A classroom aide in grades K–12 […]

A sole proprietor has health insurance for herself and has no employees. In figuring the deductible portion of the premiums, which of the following statements is correct? a. Incorrect. While 100% of premiums may be deductible as an adjustment to gross income, there are limits that can result in less than 100% of premiums being deducted. b. Incorrect. Net profits shown on Schedule C are […]

Otto Drug Store has four employees who are paid on an hourly basis plus time-and-a-half for all hours worked in excess of 40 a week. Payroll data for the week ended February 15, 2014, are shown below. Employee Hours Worked Hourly Rate Federal Income Tax Withholdings United Fund Contributions M. Dingier 39 $12.00 $34 $ —O- D. Patel 42 12.00 20 10.00 L. Grimmett 44 […]

A self-employed individual who relocates because of a new business must work in the new location for how long before the individual can deduct moving expenses? a. Incorrect. The 12 months is the testing period for employees. b. Incorrect. The 24 months is the testing period for self-employed individuals. c. Incorrect. Employees, not self-employed individuals, must work 39 weeks within a 12-month period to deduct […]

The following payroll liability accounts are included in the ledger of Grandon Company on January 1, 2014. FICA Taxes Payable $540 Federal Income Taxes Payable 1,100 State Income Taxes Payable 210 Federal Unemployment Taxes Payable 54 State Unemployment Taxes Payable 365 Union Dues Payable 200 U.S. Savings Bonds Payable 300 In January, the following transactions occurred. 10 Sent check for $200 to union treasurer for […]

Alimony recapture applies when payments in the third year decrease by more than 15,000 from the second year as a result of: a. Correct. Just because the payer spouse has payments reduced because he or she is less able to provide support does not avoid recapture. b. Incorrect. There is no recapture if the reduction is due to the death of the recipient spouse. c. […]

Morgan Company”s balance sheet at December 31, 2013, is presented below. MORGAN COMPANY Balance Sheet December 31, 2013 Cash $ 30,000 Accounts Payable $ 13,750 Inventory 30,750 Interest Payable 250 Prepaid Insurance 6,000 Notes Payable 50,000 Equipment 38,000 Owner”s Capital 40,750 $104,750 $104,750 During January 2014, the following transactions occurred. (Morgan Company uses the perpetual inventory system.) Morgan paid $250 interest on the note payable […]

This year, Janet transfers 100 shares of stock to Ben as part of their divorce decree. Janet paid $10,000 for the shares. They are worth $18,000 on the day they are transferred to Ben. He sells the shares six months later for $22,000. What is his gain on the sale of the stock? a. Incorrect. There is zero gain recognized when the property is initially […]

The financial statements ofApple Inc. and the notes to consolidated financial statements appear. Instructions for accessing and using the company”s complete annual report, including the notes to the financial statements, are also provided. Instructions Refer to Apple”s financial statements and answer the following questions about current and contingent liabilities and payroll costs. (a)What were Apple”s total current liabilities at September 24, 2011? What was the […]