ACCT 324 Week 7 Quiz

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ACCT 324 Week 7 Quiz

 1.Question :(TCO 6) Recognized gains and losses must be properly classified. Proper classification depends upon three characteristics. Which of the following is NOT one of those three characteristics?
Student Answer: The tax status of the property
 The manner of the property’s acquisition
 The manner of the property’s disposition
 The holding period of the property
 All of the above

 

 2.Question :(TCO 6) Which of the following events causes the purchaser of an option to add the cost of the option to the basis of the property to which the option relates?
Student Answer: The option is exercised.
 The option is sold.
 The option lapses.
 The option is rescinded.
 None of the above

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 3.Question :(TCO 6) On August 10, 2010, Black, Inc. acquired an office building as a result of a like-kind exchange. Black had given up a factory building that it had owned for 18 months as part of the like-kind exchange. Which of the statements below is correct?
Student Answer: The holding period of the office building does not include the holding period of the factory building.
 The holding period of the factory building starts on August 11, 2010.
 The holding period of the factory building starts on August 10, 2010.
 The holding period of the office building includes the holding period of the factory building.
 None of the above

 

 4.Question :(TCO 6) Which of the livestock below is a § 1231 asset?
Student Answer: A milk cow held for 14 months
 A pig held for 13 months
 A milk cow held for 25 months
 A horse held for 11 months
 B and C

 

 5.Question :(TCO 11) Sylvia purchased for $680 a $2,000 bond when it was issued two years ago. Sylvia amortized $200 of the original issue discount, and then sold the bond for $1,800. Which of the following statements is correct?
Student Answer: Sylvia has $920 of long-term capital gain.
 Sylvia has $1,220 of long-term capital gain.
 Sylvia has no capital gain or loss.
 Sylvia has $200 of long-term capital loss.
 None of the above

 

 6.Question :(TCO 11) On July 1, 2010, Brandon purchased an option to buy 1,000 shares of General, Inc. at $30 per share. He purchased the option for $2,000. It was to remain in effect for five months. The market experienced a decline during the latter part of the year, so Brandon decided to let the option lapse as of December 1, 2010. On his 2010 tax return, what should Brandon report?
Student Answer: A $2,000 long-term capital loss
 A $2,000 short-term capital loss
 A $2,000 § 1231 loss
 A $2,000 ordinary loss
 None of the above

 

 7.Question :(TCO 11) Tan, Inc. has a 2010 $50,000 long-term capital gain included in its $185,000 taxable income. Which of the following is correct?
Student Answer: Tan will benefit from an alternative tax on net capital gains computation.
 Tan’s regular tax on taxable income will be the same as its tax using an alternative tax on the net capital gains approach.
 Tan’s $50,000 net capital gain is not taxable.
 Tan’s regular tax on taxable income will be greater than its tax using an alternative tax on the net capital gain approach.
 None of the above

 

 8.Question :(TCO 11) Vertigo, Inc., has a 2010 net § 1231 loss of $45,000 and had a $32,000 net § 1231 gain in 2009. For 2010, Vertigo’s net §1231 loss is treated as:
Student Answer: ordinary loss.
 ordinary gain.
 capital loss.
 capital gain.
 None of the above

 

 9.Question :(TCO 11) Which of the following creates potential § 1245 depreciation recapture?
Student Answer: Amortization of purchased goodwill
 Section 179 immediate expense deduction
 An increase in the value of the property
 A decrease in the value of the property
 A and B

 

 10.Question :(TCO 11) Alice acquired a $100,000 business machine and deducted $70,000 depreciation before selling it for $80,000. What is the 1245 gain and the 1231 gain?
Student Answer: 1245 would be $70K, and 1231 would be $20K.
 1245 would be $20K, and 1231 would be $70K.
 1231 would be $50K, and 1245 would be $0.
 1231 would be $0, and 1245 would be $50K.
 None of the above

 

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