In 2012, a sole proprietor buys used office furniture at a cost of $4,200. He has a net loss from his business activities of $9,600. Which of the following options applies to him for purposes of writing off the cost of the furniture in 2012? a. Incorrect. Section 179 provides a tax deduction only if a taxpayer is profitable for the year. b. Incorrect. Bonus […]

The following payroll liability accounts are included in the ledger of Harmon Company on January 1, 2014. FICA Taxes Payable $ 760.00 Federal Income Taxes Payable 1,204.60 State Income Taxes Payable 108.95 Federal Unemployment Taxes Payable 288.95 State Unemployment Taxes Payable 1,954.40 Union Dues Payable 870.00 U.S. Savings Bonds Payable 360.00 In January, the following transactions occurred. 10 Sent check for $870.00 to union treasurer […]

The “basis” of property is the starting point for determining all of the following except: a. Incorrect. Basis is used to figure depreciation on property held for business or investment. b. Correct. Excise taxes are not based on “basis”; excise taxes may be added to the basis of property. c. Incorrect. If there is damage or destruction of property due to a casualty event, the […]

For the year ended December 31, 2014, Denkinger Electrical Repair Company reports the following summary payroll data. Gross earnings: Administrative salaries $200,000 Electricians” wages 370,000 Total $570,000 Deductions: FICA taxes $ 38,645 Federal income taxes withheld 174,400 State income taxes withheld (3%) 17,100 United Fund contributions payable 27,500 Health insurance premiums 17,200 Total $274,845 Denkinger Company”s payroll taxes are Social Security tax 6.2%, Medicare tax […]

Two years ago, Felicia received as a gift from her aunt a bracelet worth $5,000. Her aunt bought it many years ago for $800. If Felicia sells the bracelet for $4,000, her basis for figuring gain or loss is: a. Incorrect. A zero basis is used only when a taxpayer does not have information to support a different basis. b. Correct. Because the FMV at […]

On January 1, 2014, the ledger of Werth Company contains the following liability accounts. Accounts Payable $35,000 Sales Taxes Payable 5,000 Unearned Service Revenue 12,000 During January, the following selected transactions occurred. 1 Borrowed $30,000 in cash from Platteville Bank on a 4-month, 6%, $30,000 note. 5 Sold merchandise for cash totaling $11,130, which includes 6% sales taxes. 12 Performed services for customers who had […]

Adelaide sells her personal residence, which she has owned and lived in since 1988. For purposes of determining her gain or loss on the sale, which of the following expenses does not increase the basis of her home: a. Incorrect. Adding a new roof is a capital improvement that adds to the basis of a home. b. Incorrect. Adding aluminum siding to a home is […]

On February 1, 2012, a taxpayer buys 10 shares of X Corp. What is the earliest date that the stock can be sold to qualify for long-term treatment? a. Incorrect. A long-term holding period of more than one year is not satisfied simply because the sale occurs within the year following the year of purchase. b. Incorrect. A sale on February 1, 2013, results in […]

A taxpayer sells stock in 2012. Where is the sale first reported by the taxpayer? a. Incorrect. While the result of the stock sale will flow onto Schedule D, it is not entered first on this schedule. b. Incorrect. The net capital gain (or loss) eventually is reported on Form 1040, but not first (even if the sale is the taxpayer”s only capital transaction for […]

Are these assets qualifying assets? Case (a): A particular item of inventory is produced by entity E in large quantities on a repetitive basis. Production takes (aa) 15 months, (ab) one week. Case (b): At the beginning of 01, E starts constructing a building. Construction will take three years. Once completed, the building will be used for administrative purposes. Case (c): E acquires a warehouse […]