ACCT 324 Week 3 Quiz

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 1. Question : (TCO 2) Janice is single, has gross income of $38,000, and incurred the following expenses:

Charitable contribution $2,500
Taxes and interest on home $9,000
Legal fees incurred in a tax dispute $1,000
Medical expenses $4,000
Penalty on early withdrawal of savings $200

Her AGI is:

Student Answer:  $21,300.
 $28,800.
 $32,800.
 $35,500.
 $37,800.

 

 2. Question : (TCO 2) During the year, Rick had the following insured personal casualty losses (arising from one casualty). Rick also had $18,000 AGI for the year.

 Asset Adjusted Basis Fair MarketValue (Before) Fair MarketValue (After) InsuranceRecovery
A $500 $700 $300 $100
B $3,000 $2,000 $0 $500
C $700 $900 $0 $200

Rick’s casualty loss deduction is:

Student Answer:  $400.
 $600.
 $1,000.
 $1,400.
 None of the above

 

 3. Question : (TCO 3) During the current year, Chuck’s home was burglarized. Chuck had the following items stolen:

  • Securities worth $20,000: Chuck purchased the securities three years ago for $8,000.
  • A painting worth $10,000: Chuck purchased the painting two years ago for $12,000.
  • An antique vase worth $800: Chuck purchased the vase five years ago for $500.

Chuck’s homeowner’s insurance policy had a $50,000 deductible clause for thefts. If Chuck’s salary for the year was $40,000, determine the amount of Chuck’s itemized deduction as a result of the theft.

Student Answer:  $6,400
 $7,200
 $13,600
 $14,400
 None of the above

 

 4. Question : (TCO 10) Benita incurred a business expense on December 10, 2011, which she charged on her bank credit card. She paid the credit card statement, which included the charge on January 5, 2012. Which of the following is correct?
Student Answer:  If Benita is a cash method taxpayer, then she cannot deduct the expense until 2012.
 If Benita is an accrual method taxpayer, then she can deduct the expense in 2011.
 If Benita uses the accrual method, then she can choose to deduct the expense in either 2011 or 2012.
 Only B and C are correct.
 A, B, and C are correct.

 

 5. Question : (TCO 10) Paula pursued a hobby of making bedspreads in her spare time. During the year, she sold the bedspreads for $6,000. She incurred expenses as follows:

Purchases $70,000
Salaries $90,000
Other expenses $10,000
Ending inventory $20,000

Assuming that the activity is deemed a hobby and that she cannot itemize this year, how should she report these items on her tax return?

Student Answer:  Include $6,000 in income, and deduct $2,900 for AGI.
 Ignore both income and expenses since hobby losses are disallowed.
 Include $6,000 in income, and deduct nothing for AGI since all hobby expenses must be itemized.
 Include $6,000 in income, and deduct interest of $600 for AGI.
 None of the above

 

 6. Question : (TCO 10) Jim loaned his friend Sam $8,000 several years ago. During the current year, Sam declared bankruptcy and Jim was paid $1,000. For the current year, Jim has a salary of $80,000 and a long-term capital gain of $15,000. What amount of net loss may Jim deduct for the current year?
Student Answer:  $0
 $3,000
 $6,000
 $7,000
 None of the above

 

 7. Question : (TCO 10) Two years ago, Sharon loaned her sister $10,000 to buy a car. No note was issued for the loan, no provision for interest was made, and no repayment date was specified. During the current year, Sharon’s sister died leaving no estate. Sharon’s bad debt deduction for the current year is:
Student Answer:  $0.
 $3,000.
 $6,000.
 $10,000.
 None of the above

 

 8. Question : (TCO 10) Tan Company acquires a new machine (10-year property) on January 15, 2011 at a cost of $200,000. Tan also acquires another new machine (seven-year property) on November 5, 2010 at a cost of $40,000. No election is made to use the straight-line method. The company does NOT make the § 179 election. Determine the total deductions in calculating taxable income related to the machines for 2011.
Student Answer:  $24,000
 $25,716
 $102,000
 $132,858
 None of the above

 

 9. Question : (TCO 10) Carlos purchased an apartment building on November 16, 1993 for $1 million. Determine the cost recovery for 2011.
Student Answer:  $36,360
 $32,100
 $45,500
 $331,850
 None of the above

 

 10. Question : (TCO 2) Jane’s automobile, which was used only for business purposes, was destroyed by fire. Jane had unintentionally allowed her insurance coverage to expire. The fair value of the automobile was $9,000 at the time of the fire, and its adjusted basis was $10,000. Jane is allowed a loss deduction of:
Student Answer:  $10,000 for deduction.
 $10,000 from deduction.
 $9,000 for deduction.
 $9,000 from deduction.
 None of the above

 

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