Description
Test Bank For Income Tax Fundamentals 2016 34th Edition
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1. Lew started a business writing a popular syndicated Japanese gardening column in the current year and will report a profit for his first year. His results of operations are as follows: Gross income $38,000 Travel expense 4,000 Business suits, to visit magazine editors 1,000 Transportation, 838 miles (at 57.5 cents per mile) 482 Entertainment 800 Subscription to bonsai and Japanese gardening magazines 500 Gifts: 8 at $100 each; 2 at $20 each 840 Rent and utilities for apartment, in total What is the net income Lew should show on his Schedule C? Show the calculation of his taxable income. Gross income $_________ Expenses (describe each) _________ _________ _________ _________ _________ _________ _________
Taxable income $_________ ANSWER: Gross income $38,000 Expenses Travel $ 4,000 Transportation-mileage 482 Entertainment ($800 × 50%) 400 Subscriptions 500 Gifts, 8 at $25, 2 at $20 240 Rent and utilities allocated to home office Total expenses $ 7,122 Taxable income $30,878 POINTS: 1 DIFFICULTY: Moderate QUESTION TYPE: Subjective Short Answer HAS VARIABLES: False LEARNING OBJECTIVES: ITF.WABG.16.LO:3-01 – LO:3-01 NATIONAL STANDARDS: United States – BUSPROG: Analytic STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Comprehension |
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2. Schedule C or Schedule C-EZ may be used to report the net profit or loss from a partnership with business expenses of $2,500 or less. a. True b. False ANSWER: False RATIONALE: Schedule C or Schedule C-EZ are used to report income and expenses for an individual taxpayer who operates a trade or business as a sole proprietor. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: True / False HAS VARIABLES: False LEARNING OBJECTIVES: ITF.WABG.16.LO:3-01 – LO:3-01 NATIONAL STANDARDS: United States – BUSPROG: Analytic STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Knowledge |
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3. To file a Schedule C-EZ, the taxpayer must: a. Have gross receipts of $25,000 or less from the business. b. Have business expenses of $5,000 or less. c. Have inventory of less than $2,000 during the year. d. Have no more than 2 businesses. e. Have no more than 5 employees during the year. ANSWER: b POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: ITF.WABG.16.LO:3-01 – LO:3-01 NATIONAL STANDARDS: United States – BUSPROG: Analytic STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Knowledge |
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4. What income tax form does a self-employed sole proprietor usually use to report business income and expense? a. Schedule A, Miscellaneous Itemized Deductions b. Schedule B c. Schedule C d. Form 2106, Employee Business Expenses e. None of the above ANSWER: c POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: ITF.WABG.16.LO:3-01 – LO:3-01 NATIONAL STANDARDS: United States – BUSPROG: Analytic STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Knowledge |
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5. In the current year, Johnice started a profitable bookkeeping business as a sole proprietor. Johnice made $38,000 in her first year of operation. What two forms must Johnice file for her business? a. Schedules A and C b. Schedules D and E c. Schedule SE and C d. Schedules B and C e. None of the above ANSWER: c POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: ITF.WABG.16.LO:3-01 – LO:3-01 NATIONAL STANDARDS: United States – BUSPROG: Analytic STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Knowledge |
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6. Maria runs a small business out of her home. She has expenses of $2,000 per year and uses the cash basis method of accounting. Her only employee is her cousin who works for her part-time. What form should she use to report her business income? a. Schedule A b. Schedule C c. Schedule F d. Schedule C-EZ e. Schedule B ANSWER: b RATIONALE: Schedule C-EZ cannot be used if the business has employees. POINTS: 1 DIFFICULTY: Easy QUESTION TYPE: Multiple Choice HAS VARIABLES: False LEARNING OBJECTIVES: ITF.WABG.16.LO:3-01 – LO:3-01 NATIONAL STANDARDS: United States – BUSPROG: Analytic STATE STANDARDS: United States – AK – AICPA: FN-Reporting KEYWORDS: Bloom’s: Knowledge |
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