Question 1

Which one of the following entities cannot use the cash method for tax purposes?

Accepted Answer

E

Question 2

Choose the incorrect statement.

Accepted Answer

The incorrect statement is A) because for tax purposes, the IRS requires that the books and records be kept consistent with the tax year-end basis used for filing. This ensures that the financial information accurately reflects the taxpayer's income and deductions for the specific period being reported.

Question 3

Amy is a calendar year taxpayer reporting on the cash basis.Indicate which of the following income or expense items should not be included in her 2017 tax return.

Accepted Answer

B

Question 4

William,a cash-basis sole proprietor,had the following receipts and disbursements for the current year: ​
 For the current year,what amount should William report as net earnings from self-employment?

Accepted Answer

Net earnings from self-employment is calculated as:
Gross receipts ($20,000) - Business expenses ($5,000) = Net earnings from self-employment ($15,000)

Question 5

Mark the correct answer.In cash basis accounting,for tax purposes:

Accepted Answer

In cash basis accounting, income is recognized when it is actually or constructively received, and expenses are recognized when they are paid.

Question 6

The hybrid method of accounting involves the use of both the accrual and cash methods of accounting.

Accepted Answer

The hybrid method of accounting combines the accrual method for recording certain transactions and the cash method for others.

Question 7

Kate is an accrual basis,calendar-year taxpayer.On November 1,2017,Kate leased out a building for $4,500 a month.On that day Kate received 7 months rental income on the building,a total of $31,500 ($4,500 × 7 months).How much income must Kate include on her 2017 tax return as a result of this transaction?

Accepted Answer

As an accrual basis taxpayer, Kate must recognize income when it is earned, not when it is received. Since she received 7 months of rent in advance, she must include the entire $31,500 in her 2017 income.

Question 8

Under the cash basis of accounting,expenses are generally deducted in the year they are paid.

Accepted Answer

Under the cash basis of accounting, expenses are generally deducted in the year they are paid, not in the year they are incurred.

Question 9

Vernon is a cash basis taxpayer with a calendar tax year.On October 1,2017,Vernon entered into a lease to rent a building for use in his business at $3,000 a month.On that day Vernon paid 18 months rent on the building,a total of $54,000 ($3,000 × 18 months).How much may Vernon deduct for rent expense on his 2017 tax return?

Accepted Answer

The answer of Vernon is a cash basis taxpayer with...

Question 10

Most partnerships,S corporations,and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

Accepted Answer

This statement is false. Most partnerships, S corporations, and personal service corporations owned by individuals choose a calendar year-end (December 31) or a fiscal year-end that coincides with their natural business cycle. Deferment of income is not typically a reason for choosing a September 30 year-end.

Question 11

If a corporation has a short tax year,other than their first or last year of operation,explain how the corporation calculates the tax for the short period.

Accepted Answer

The answer of If a corporation has a short tax...

Question 12

The Dot Corporation has changed its year-end from a calendar year-end to August 31.The income for its short period from January 1 to August 31 is $54,000.The tax for this short period is:

Accepted Answer

The answer of The Dot Corporation has changed its year-end...

Question 13

Which of the following is not an acceptable method of accounting under the tax law?

Accepted Answer

The answer of Which of the following is not an...

Question 14

"Annualizing" is a method by which the taxpayer can usually decrease the amount of tax he or she pays.

Accepted Answer

"Annualizing" is a method of calculating tax liability based on the assumption that income is earned evenly throughout the year, even if it was actually earned in a shorter period of time. This method may be used to calculate quarterly estimated taxes, but it does not decrease the amount of tax owed.

Question 15

Becky is a cash basis taxpayer with the following transactions during her calendar tax year: What is the amount of Becky's taxable income from her business for this tax year?

Accepted Answer

The answer of Becky is a cash basis taxpayer with...

Question 16

Generally,cash basis taxpayers must account for payments of prepaid interest using the accrual method.

Accepted Answer

Cash basis taxpayers must use the accrual method for prepaid interest payments in order to match the expense with the appropriate period of time that the interest is accruing for.

Question 17

Quince Corporation changes its year-end from a fiscal year-end to a calendar year-end.The corporation has taxable income of $39,000 for its 3-month short period beginning October 1,2017 and ending December 31,2017.Calculate the corporation's tax for the short period.

Accepted Answer

The answer of Quince Corporation changes its year-end from a...

Question 18

All S corporations must use the accrual basis of accounting.

Accepted Answer

S corporations can choose to use either the accrual or cash basis of accounting, depending on their annual gross receipts. If their average gross receipts for the previous 3 tax years do not exceed $25 million, they may use the cash basis of accounting.

Question 19

From the records of Tom,a cash basis sole proprietor,the following information was available: What amount should Tom report as net earnings from self-employment?

Accepted Answer

The answer of From the records of Tom,a cash basis...

Question 20

In general,accrual basis taxpayers recognize income when it is earned,regardless of when it is received.

Accepted Answer

Accrual basis taxpayers recognize income when it is earned, regardless of when it is received. This means that income is recognized when the taxpayer has performed the services or sold the goods, regardless of whether or not they have yet been paid for those services or goods.

Quiz 7: Accounting Periods and Methods and Depreciation

Which one of the following entities cannot use the cash method for tax purposes?

Choose the incorrect statement.

Amy is a calendar year taxpayer reporting on the cash basis.Indicate which of the following income or expense items should not be included in her 2017 tax return.

William,a cash-basis sole proprietor,had the following receipts and disbursements for the current year: For the current year,what amount should William report as net earnings from self-employment?

Mark the correct answer.In cash basis accounting,for tax purposes:

The hybrid method of accounting involves the use of both the accrual and cash methods of accounting.

Under the cash basis of accounting,expenses are generally deducted in the year they are paid.

Most partnerships,S corporations,and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

If a corporation has a short tax year,other than their first or last year of operation,explain how the corporation calculates the tax for the short period.

The Dot Corporation has changed its year-end from a calendar year-end to August 31.The income for its short period from January 1 to August 31 is $54,000.The tax for this short period is:

Which of the following is not an acceptable method of accounting under the tax law?

"Annualizing" is a method by which the taxpayer can usually decrease the amount of tax he or she pays.

Becky is a cash basis taxpayer with the following transactions during her calendar tax year: What is the amount of Becky's taxable income from her business for this tax year?

Generally,cash basis taxpayers must account for payments of prepaid interest using the accrual method.

Quince Corporation changes its year-end from a fiscal year-end to a calendar year-end.The corporation has taxable income of $39,000 for its 3-month short period beginning October 1,2017 and ending December 31,2017.Calculate the corporation's tax for the short period.

All S corporations must use the accrual basis of accounting.

From the records of Tom,a cash basis sole proprietor,the following information was available: What amount should Tom report as net earnings from self-employment?

In general,accrual basis taxpayers recognize income when it is earned,regardless of when it is received.

Quiz 7: Accounting Periods and Methods and Depreciation

Which one of the following entities cannot use the cash method for tax purposes?

Choose the incorrect statement.

Amy is a calendar year taxpayer reporting on the cash basis.Indicate which of the following income or expense items should not be included in her 2017 tax return.

William,a cash-basis sole proprietor,had the following receipts and disbursements for the current year: ​ For the current year,what amount should William report as net earnings from self-employment?

Mark the correct answer.In cash basis accounting,for tax purposes:

The hybrid method of accounting involves the use of both the accrual and cash methods of accounting.

Under the cash basis of accounting,expenses are generally deducted in the year they are paid.

Most partnerships,S corporations,and personal service corporations owned by individuals choose a September 30 year-end so that they may defer 3 months of income.

If a corporation has a short tax year,other than their first or last year of operation,explain how the corporation calculates the tax for the short period.

The Dot Corporation has changed its year-end from a calendar year-end to August 31.The income for its short period from January 1 to August 31 is $54,000.The tax for this short period is:

Which of the following is not an acceptable method of accounting under the tax law?

"Annualizing" is a method by which the taxpayer can usually decrease the amount of tax he or she pays.

Becky is a cash basis taxpayer with the following transactions during her calendar tax year: What is the amount of Becky's taxable income from her business for this tax year?

Generally,cash basis taxpayers must account for payments of prepaid interest using the accrual method.

Quince Corporation changes its year-end from a fiscal year-end to a calendar year-end.The corporation has taxable income of $39,000 for its 3-month short period beginning October 1,2017 and ending December 31,2017.Calculate the corporation's tax for the short period.

All S corporations must use the accrual basis of accounting.

From the records of Tom,a cash basis sole proprietor,the following information was available: What amount should Tom report as net earnings from self-employment?

In general,accrual basis taxpayers recognize income when it is earned,regardless of when it is received.

William,a cash-basis sole proprietor,had the following receipts and disbursements for the current year: For the current year,what amount should William report as net earnings from self-employment?