Question 1

A calendar year, cash basis corporation began business on April 1, 2012, and paid $2,400 for a 24-month liability insurance policy. An accrual basis, calendar year taxpayer also began business on April 1, 2012, and purchased a 24-month liability insurance policy. Both the cash basis and accrual basis taxpayers' deduction for insurance expense on the policy for 2012 is $900 (9/12 ´ $1,200).

Accepted Answer

A) True 
 B)False

Question 2

A C corporation's selection of a tax year, generally, is independent of the tax year of its principal shareholders.

Accepted Answer

A) True 
 B)False

Question 3

In 2012, T Corporation changed its tax year from ending each September 30th to ending each December 31st. The corporation earned $25,000 during the period October 1, 2012 through December 31, 2012. The tax on the annualized income for the short period will be greater than the tax on $25,000 when the tax rates are progressive.

Accepted Answer

A) True 
 B)False

Question 4

In the case of a small home construction company that builds under long-term contracts, generally:

Accepted Answer

A)  The percentage of completion method is required to report the income from the construction contracts.
B)  The percentage of completion method can be elected and generally will defer income until the contract is completed.
C)  The completed contract method can be used and generally will defer income.
D)  The accrual method must be used because inventories are an income-producing factor.
E)  None of the above is true.F) A) and C)
G) None of the above

Question 5

Sandstone, Inc., has consistently included some factory overhead as a current expense, rather than as a cost of producing goods.As a result, the beginning inventory for 2012 is understated by $40,000.If Sandstone voluntarily changes accounting methods effective January 1, 2012, the positive adjustment to the inventory is a § 481 adjustment and $10,000 must be added to taxable income for each year 2012, 2013, 2014, and 2015.

Accepted Answer

A) True 
 B)False

Question 6

Gold Corporation, Silver Corporation, and Copper Corporation are equal partners in the GSC Partnership.The partners' tax year-ends are as follows:

Accepted Answer

A)  The partnership is free to elect any tax year.
B)  The partnership may use any of the 3 year-end dates that its partners use.
C)  The partnership must use a September 30th year-end.
D)  The partnership must use a April 30th year-end.
E)  None of the above.F) C) and D)
G) All of the above

Question 7

Generally, deductions for additions to reserves for estimated future costs (e.g., an allowance for estimated warranty costs)  are not allowed for Federal income tax purposes because allowing the deduction would:

Accepted Answer

A)  Result in a mismatching of revenues and expenses.
B)  Violate established public policy.
C)  Violate the economic performance requirement.
D)  Violate the tax benefit rule.
E)  None of the above.F) B) and D)
G) A) and B)

Exam 16: Accounting Periods and Methods

A C corporation's selection of a tax year, generally, is independent of the tax year of its principal shareholders.

Correct Answer
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Generally, deductions for additions to reserves for estimated future costs (e.g., an allowance for estimated warranty costs) are not allowed for Federal income tax purposes because allowing the deduction would:

Correct Answer
verified

Correct Answer
verified

Gold Corporation, Silver Corporation, and Copper Corporation are equal partners in the GSC Partnership.The partners' tax year-ends are as follows:

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

In the case of a small home construction company that builds under long-term contracts, generally:

Correct Answer
verified

Exam 16: Accounting Periods and Methods

A C corporation's selection of a tax year, generally, is independent of the tax year of its principal shareholders.

Correct AnswerverifiedShow Answer

Generally, deductions for additions to reserves for estimated future costs (e.g., an allowance for estimated warranty costs) are not allowed for Federal income tax purposes because allowing the deduction would:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Gold Corporation, Silver Corporation, and Copper Corporation are equal partners in the GSC Partnership.The partners' tax year-ends are as follows:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In the case of a small home construction company that builds under long-term contracts, generally:

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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