The document provides a practice exam for ACC 455 with multiple choice questions covering various topics in corporate and partnership taxation. It includes questions on corporate formation, S corporations, partnerships, distributions, and earnings and profits. The document provides the questions and multiple choice answers to help students study for their final exam.
this presentation consists of the information abou TDS ans TCS and their implications under GST. It also includes the differnce between both the terms.
Partnerships generally are associated with the practice of law, medicine, public accounting and other professions, and also with small business enterprises
Disamping Orang pribadi dikenal juga subjek hukum PPh yang bukan manusia yaitu Badan hukum. Badan hukum merupakan organisasi atau sekelompok manusia yang mempunyai tujuan tertentu dan dapat menyandang hak dan kewajiban.
Bentuk-bentuk badan antara lain adalah perseroan komanditer, perseroan terbatas, badan usaha milik negara, badan usaha milik daerah, firma, koperasi, kongsi, dana pensiun, yayasan, lembaga, organisasi massa, organisasi sosial politik, dan bentuk usaha tetap. Tidak hanya itu, badan juga dapat berbentuk perkumpulan seperti asosiasi, perhimpunan, dan ikatan.
Tax Deducted At Source - What is TDS & Why is it DeductedIts All About Money
Tax Deduced at source (TDS) is a means of collecting income tax in India, governed under the Indian Income Tax Act of 1961. Learn more about what is TDS and why is it deducted.
Limited Liability Partnership (LLP) is a new form of business vehicle. However, the treatment of tax is totally difference with conventional tax computation. This presentation slide serves as a guide to understand how the LLP being taxed and the treatment of unabsorbed business loss and unabsorbed capital allowance.
this presentation consists of the information abou TDS ans TCS and their implications under GST. It also includes the differnce between both the terms.
Partnerships generally are associated with the practice of law, medicine, public accounting and other professions, and also with small business enterprises
Disamping Orang pribadi dikenal juga subjek hukum PPh yang bukan manusia yaitu Badan hukum. Badan hukum merupakan organisasi atau sekelompok manusia yang mempunyai tujuan tertentu dan dapat menyandang hak dan kewajiban.
Bentuk-bentuk badan antara lain adalah perseroan komanditer, perseroan terbatas, badan usaha milik negara, badan usaha milik daerah, firma, koperasi, kongsi, dana pensiun, yayasan, lembaga, organisasi massa, organisasi sosial politik, dan bentuk usaha tetap. Tidak hanya itu, badan juga dapat berbentuk perkumpulan seperti asosiasi, perhimpunan, dan ikatan.
Tax Deducted At Source - What is TDS & Why is it DeductedIts All About Money
Tax Deduced at source (TDS) is a means of collecting income tax in India, governed under the Indian Income Tax Act of 1961. Learn more about what is TDS and why is it deducted.
Limited Liability Partnership (LLP) is a new form of business vehicle. However, the treatment of tax is totally difference with conventional tax computation. This presentation slide serves as a guide to understand how the LLP being taxed and the treatment of unabsorbed business loss and unabsorbed capital allowance.
ACC 545 Final Exam 100% Correct Answer
Description:
1) A company changes from percentage-of-completion to completed-contract, which is the method used for tax purposes. The entry to record this change should include a
A. debit to Retained Earnings in the amount of the difference on prior years, net of tax.
B. debit to Loss on Long-Term Contracts in the amount of the difference on prior years, net of tax.
C. credit to Deferred Tax Liability.
D. debit to Construction in Process.
2) Which of the following is accounted for as a change in accounting principle?
A. A change from expensing immaterial expenditures to deferring and amortizing them as they become material
B. A change from the cash basis of accounting to the accrual basis of accounting
C. A change in inventory valuation from average cost to FIFO
D. A change in the estimated useful life of plant assets
3) A company changes from straight-line to an accelerated method of calculating depreciation, which will be similar to the method used for tax purposes. The entry to record this change should include a
A. debit to Deferred Tax Asset.
B. debit to Retained Earnings in the amount of the difference on prior years.
C. credit to Deferred Tax Liability.
D. credit to Accumulated Depreciation.
4) Presenting consolidated financial statements this year when statements of individual companies were presented last year is
A. an accounting change that should be reported by restating the financial statements of all prior periods presented.
B. an accounting change that should be reported prospectively.
C. NOT an accounting change.
D. a correction of an error.
5) During 2008, a construction company changed from the completed-contract method to the percentage-of-completion method for accounting purposes but not for tax purposes. The following lists include gross profit figures under both methods for the past 3 years:
Completed-Contract
Percentage-of-Completion
2006
$ 475,000
$ 800,000
2007
625,000
950,000
2008
700,000
1,050,000
$1,800,000
$2,800,000
Assuming an income tax rate of 40% for all years, the affect of this accounting change on prior periods should be reported by a credit of what?
A. $390,000 on the 2008 income statement
B. $600,000 on the 2008 income statement
C. $390,000 on the 2008 retained earnings statement
D. $600,000 on the 2008 retained earnings statement
6) On January 1, 2005, Baden Co. purchased a machine, which was its only depreciable asset, for $300,000. The machine has a 5-year life, and no salvage value. Sum-of-the-years’-digits depreciation has been used for financial statement reporting and the elective straight-line method for income tax reporting. Effective January 1, 2008, for financial statement reporting, Baden decided to change to the straight-line method for depreciation of the machine. Assume that Baden can justify the change.
Baden’s income before depreciation, before inc
1.Isaac Inc. began operations in January 2013. For certain of it.docxjackiewalcutt
1.
Isaac Inc. began operations in January 2013. For certain of its property sales, Isaac recognizes income in the period of sale for financial reporting purposes. However, for income tax purposes, Isaac recognizes income when it collects cash from the buyer's installment payments.
In 2013, Isaac had $600 million in sales of this type. Scheduled collections for these sales are as follows:
Assume that Isaac has a 30% income tax rate and that there were no other differences in income for financial statement and tax purposes.
Ignoring operating expenses, what deferred tax liability would Isaac report in its year-end 2013 balance sheet?
2.
Beresford Inc. purchased several investment securities during 2012, its first year of operations. The following information pertains to these securities. The fluctuations in their fair values are not considered permanent.
What balance sheet amount would Beresford report for its total investment securities at 12/31/2012?
3. Hutton Construction specializes in the construction of commercial and industrial buildings. The contractor is experienced in bidding long-term construction projects of this type, with the typical project lasting fifteen to twenty-four months. The contractor uses the percentage-of-completion method of revenue recognition since, given the characteristics of the contractor's business and contracts, it is the most appropriate method. Progress toward completion is measured on a cost to cost basis. Hutton began work on a lump-sum contract at the beginning of 2014. As bid, the statistics were as follows:
Lump-sum price (contract price)
$4,000,000
Estimated costs
Labor
$ 850,000
Materials and subcontractor
1,750,000
Indirect costs
400,000
3,000,000
$1,000,000
At the end of the first year, the following was the status of the contract:
Billings to date
$2,230,000
Costs incurred to date
Labor
$ 464,000
Materials and subcontractor
1,098,000
Indirect costs
193,000
1,755,000
Latest forecast total cost
3,000,000
It should be noted that included in the above costs incurred to date were standard electrical and mechanical materials stored on the job site, but not yet installed, costing $105,000. These costs should not be considered in the costs incurred to date.
Instructions
(a)
Compute the percentage of completion on the contract at the end of 2014.
(b)
Indicate the amount of gross profit that would be reported on this contract at the end of 2014.
(c)
Make the journal entry to record the income (loss) for 2014 on Hutton’s books.
4. Computation of selected ratios.
The following data is given:
December 31,
2013
2012
Cash
$ 66,000
$ 50,000
Accounts receivable (net)
68,000
60,000
Inventories
90,000
110,000
Plant assets (net)
383,000
325,000
Accounts payable
57,000
40,000
Salaries and wages payable
10,000
5,000
Bonds payable
70,000
70,000
10% Preferred stock, $40 par
100,000
100,000
Common stock, ...
The following information is for Henenlotter Inc. for the year end.docxcherry686017
The following information is for Henenlotter Inc. for the year ended December 31, 2012.
Henenlotter had a cash and cash equivalents balance of $7100 on January 1, 2012.
CASH RECEIVED FROM:
Customers
?
Interest on investments
600
Sale of land (not in use)
1,000
Sale of Henenlotter Inc. common stock
750
Sale of Janis Corp. stock
500
Issuance of debt securities (bonds)
2,000
CASH PAID FOR:
Interest on debt
300
Income tax
80
Debt principal reduction
1,500
Purchase of equipment
4,100
Purchase of inventory
1,000
Dividends paid on Henenlotter common stock
200
Operating expenses
400
OTHER DATA
Revenue
600
Accounts Receivable (Jan. 1, 2012)
1,200
Accounts Receivable (Dec. 31, 2012)
900
Accounts written off during the year
200
Prepare a Statement of Cash Flows for the year.
Use the direct method for the operating activities section.
1. Four different competent accountants independently agree on the amount and method of reporting an economic event. The concept demonstrated is:
A. Reliability.
B. Comparability.
C. Completeness.
D. Verifiability.
E. All of the above
2. Which of the following best demonstrates the full disclosure principle?
A. The multi-step income statement.
B. The auditors' report.
C. The company's tax return.
D. Notes to financial statements.
E. None of the above.
3. Disclosure notes to a company's financial statements:
A. Are relatively unimportant facts that don't belong in the basic financial statements.
B. Document the source of financial statement facts, like literary footnotes.
C. Are an integral part of a company's financial statements.
D. Are irrelevant facts that are immaterial in amount.
E. None of the above.
4. An important argument in support of historical cost information is:
A. Relevance.
B. Predictive quality for future cash flows.
C. Materiality.
D. Verifiability.
E. All of the above
5. Primecoat Corporation could disseminate its annual financial statements two days earlier if it shifted substantial human resources from other operations to the annual report project. Management decided the value of the earlier report was not worth the added commitment of resources. The concept best demonstrated is:
A. Timeliness.
B. Materiality.
C. Relevance.
D. Cost effectiveness.
E. All of the above.
6. Mega Loan Company has very stringent credit requirements and, accordingly, has negligible losses from uncollectible accounts. The company's independent accountants did not protest when, contrary to GAAP, the company recorded bad debt expense only when specific accounts were determined to be uncollectible, rather than use an allowance for uncollectible accounts. The concept demonstrated is:
A. Comparability.
B. Faithful representation.
C. Cost effectiveness.
D. Materiality.
E. Two of the above are correct.
7. Recognizing expected losses immediately, but deferring expected gains, is an example of:
A. Materiality.
B. Conservatism.
C. Cost effectiveness.
D. Timeliness.
E. All o ...
A.) TrueFalse1 A distribution from a corporation will be .docxrhetttrevannion
A.)
True/False
1
A distribution from a corporation will be taxable to the recipient shareholders only to the extent of the corporation’s E & P.
2
All distributions that are not dividends are a return of capital and decrease the shareholder’s basis.
3
All cash distributions received from a corporation with a positive balance in accumulated E & P at the beginning of the year will be taxed as dividend income.
4
A distribution in excess of E & P is treated as capital gain by shareholders.
5
The terms “earnings and profits” and “retained earnings” are identical in meaning.
6
Regardless of any deficit in current E & P, distributions during the year are taxed as dividends to the extent of accumulated E & P.
7
In a property distribution, the amount of dividend income recognized by a shareholder is always reduced by the amount of liability assumed by a shareholder.
8
Business reasons, and not tax incentives, constitute the primary motivation for most corporations to form a conglomerate and file tax and financial accounting reports on a consolidated basis.
9
A consolidated Federal income tax return may be the product of a merger of the affiliates, or another corporate combination.
10
The consolidated return rules are designed to allow a tax-neutral means by which to elect to file on a consolidated basis.
11
Most of the Federal consolidated income tax return rules are found in detailed sections of the tax Regulations.
12
When the parent acquires 51% of a subsidiary U.S. corporation, the subsidiary can join the consolidated financial statements and the consolidated tax return of the parent.
13
A consolidated Federal income tax group must meet the eligibility requirements of the Regulations on the first day of the first year for which the election to consolidate is effective, and then on the last day of every succeeding tax year.
14
The right to file on a consolidated basis is available to a group of corporations when they constitute a “parent-subsidiary affiliated group.”
15 A partnership is an association formed by two or more taxpayers (which may be any type of entity) to carry on a trade or business.
16
A limited partnership (LP) offers all partners protection from claims by the LP’s creditors.
17
The taxable income of a partnership flows through to the partners, who report the income on their tax returns.
18
Jack and Jill formed the equal JJ Partnership during the current year, with Jack contributing $100,000 in cash and Jill contributing land (basis of $60,000, fair market value of $40,000) and equipment (basis of $0, fair market value of $60,000). Jill recognizes a $40,000 gain on the contribution and her basis in her partnership interest is $100,000.
19
Section 721 provides that no gain or loss is recognized on a contribution of property to a partnership in exchange for an interest in the partnership. An exception might apply if the taxpayer receives a cash distribution from the partnership .
Fundamentals of Taxation 2005 – A Forms ApproachSolutions Manu.docxbudbarber38650
Fundamentals of Taxation 2005 – A Forms Approach
Solution
s Manual
PAGE CHAPTER 14DISCUSSION QUESTIONS AND PROBLEMS
Discussion Questions
1.Discuss the formation of a partnership. Is any gain or loss recognized? Explain?
2. What entity forms are considered partnerships for federal income tax purposes?
3. How does taxation for the corporate form and the partnership form differ?
4. What is the concept of basis? In your discussion, differentiate between outside basis and inside basis.
5. Elaborate on the term basis-in – basis-out. What does that phrase mean in the context of a partnership formation?
6. How can two partners, each with a 50% interest in a partnership, have different amounts of outside basis at the formation of a partnership? Shouldn’t the two partners contribute the same amount to have the same interest?
7. When a partnership receives an asset from a partner, does the partnership ever recognize a gain? What is the basis of the asset in the hands of the partnership after contribution?
8. Discuss the concept of steps into the shoes. Does how this concept pertains to the partnership, the partners, or both?
9. Why would smaller partnerships (and other businesses for that matter) use only the tax basis of accounting, which does not follow GAAP?
10. How is depreciation calculated by the partnership when a partner contributes a business asset?
11. Discuss the concepts of ordinary income and separately stated items concerning partnerships. When must a partnership item of income or loss be separately stated and why?
12. Can a partner have a salary from a partnership? Why? What is a guaranteed payment?
13. Are guaranteed payments treated as an ordinary income items or as separately stated items?
14. Is the Section 179 expense deduction allowed for partnerships? If so, is Section 179 an ordinary income item or a separately stated item? Why?
15. If a partner owns a 20% interest, does that necessarily mean that he or she will receive 20% of the net income from the partnership? Explain?
16. Is partnership income considered self-employment income? If so, how is it calculated?
17. Why must some income and gain items be separately stated in a partnership?
18. Explain why nontaxable income and nondeductible expenses increase or reduce outside basis?
19. When is it mandatory that a partner calculate his or her partner interest basis (outside basis)? What items affect the outside basis of a partner?
20. How does a partner’s share of partnership liabilities affect his or hers outside basis?
21. The general rule is that partners do not recognize any gain when he or she receives a distribution. In what circumstances might a partner recognize a gain on a current distribution?
22. Define precontribution gain? What causes a partner to recognize it?
23. Describe the rules concerning the basis of property distributed to a partner. How does the concept of “basis-in, basis-out” apply to part.
Business Valuation Principles for EntrepreneursBen Wann
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Memorandum Of Association Constitution of Company.pptseri bangash
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A Memorandum of Association (MOA) is a legal document that outlines the fundamental principles and objectives upon which a company operates. It serves as the company's charter or constitution and defines the scope of its activities. Here's a detailed note on the MOA:
Contents of Memorandum of Association:
Name Clause: This clause states the name of the company, which should end with words like "Limited" or "Ltd." for a public limited company and "Private Limited" or "Pvt. Ltd." for a private limited company.
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Registered Office Clause: It specifies the location where the company's registered office is situated. This office is where all official communications and notices are sent.
Objective Clause: This clause delineates the main objectives for which the company is formed. It's important to define these objectives clearly, as the company cannot undertake activities beyond those mentioned in this clause.
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Liability Clause: It outlines the extent of liability of the company's members. In the case of companies limited by shares, the liability of members is limited to the amount unpaid on their shares. For companies limited by guarantee, members' liability is limited to the amount they undertake to contribute if the company is wound up.
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Capital Clause: This clause specifies the authorized capital of the company, i.e., the maximum amount of share capital the company is authorized to issue. It also mentions the division of this capital into shares and their respective nominal value.
Association Clause: It simply states that the subscribers wish to form a company and agree to become members of it, in accordance with the terms of the MOA.
Importance of Memorandum of Association:
Legal Requirement: The MOA is a legal requirement for the formation of a company. It must be filed with the Registrar of Companies during the incorporation process.
Constitutional Document: It serves as the company's constitutional document, defining its scope, powers, and limitations.
Protection of Members: It protects the interests of the company's members by clearly defining the objectives and limiting their liability.
External Communication: It provides clarity to external parties, such as investors, creditors, and regulatory authorities, regarding the company's objectives and powers.
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Binding Authority: The company and its members are bound by the provisions of the MOA. Any action taken beyond its scope may be considered ultra vires (beyond the powers) of the company and therefore void.
Amendment of MOA:
While the MOA lays down the company's fundamental principles, it is not entirely immutable. It can be amended, but only under specific circumstances and in compliance with legal procedures. Amendments typically require shareholder
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1. ACC 455 FINAL EXAMS
TO DOWNLOAD THE ANSWERS
Visit: www.finalexamguideline.com
1) Regulations are
A. equal in authority to legislation if interpretative
B. equal in authority to legislation if statutory
C. equal in authority to legislation
D. presumed to be valid and to have almost the same weight as the IRC
2) Identify which of the following statements is false.
A. All are false.
B. Members from both the House and the Senate are on the Conference Committee.
C. When tax advisors speak of the tax law, they usually have in mind just the Internal
Revenue Code.
D. Records of committee hearings are helpful in determining Congressional intent.
3) Which of the following statements regarding proposed regulations is not correct?
A. Proposed regulations do not provide any insight into the IRS's interpretation of the
tax law.
B. Practitioners and other interested parties may comment on proposed regulations.
C. Proposed regulations expire after 3 years.
D. Proposed and temporary regulations are generally issued simultaneously.
4) Which of the following statements about a partnership is true?
A. Partners are considered employees of the partnership.
B. Partners are taxed on distributions from a partnership.
C. A partnership is a taxpaying entity.
D. Partners are taxed on their allocable share of income whether it is distributed or not.
5) Which of the following is an advantage of a sole proprietorship over other business forms?
2. A. Ease of formation
B. The deduction for compensation paid to the owner
C. Tax-exempt treatment of fringe benefits
D. Low tax rates on dividends
6) Which of the following statements is incorrect?
A. S corporation losses can offset shareholder income from other sources.
B. The number of S corporation shareholders is unlimited.
C. S corporations must allocate income and expenses to their shareholders based on
their proportionate ownership interest.
D. S corporation income is taxed to shareholders when earned.
7) Three members form an LLC in the current year. Which of the following statements is
incorrect?
A. If the LLC elects to use its default classification, it can elect to change its status to
being taxed as a C corporation beginning with the third tax year after the initial classification.
B. The LLC can elect to have its default classification ignored.
C. The LLC's default classification under the check-the-box rules is as a partnership.
D. The LLC can elect to be taxed as a C corporation with no special tax consequences.
8) Identify which of the following statements is true.
A. Under the check-the-box regulations, an LLC that has one member (owner) may be
disregarded as an entity separate from its owner.
B. An unincorporated business may not be taxed as a corporation.
C. A new LLC that is owned by four members elects to be taxed under its default
classification (as a partnership) in its first year of operations. The entity is prohibited from
changing its tax classification at any time in the future.
D. All are false.
9) Identify which of the following statements is false.
A. Once an election is made to change its classification, an entity cannot change again
for 60 months.
3. B. Under the check-the-box regulations, an LLC that has only two members (owners)
must be taxed as a partnership.
C. The check-the-box regulations permit an LLC to be taxed as a C corporation.
D. A business need not be incorporated under state or federal law to be taxed as a
corporation.
10) Barry, Dan, and Edith together form a new corporation; Barry and Dan each contribute
property in exchange for stock. Within 2 weeks after the formation, the corporation issues
additional stock to Edith in exchange for property. Barry and Dan each hold 10,000 shares and
Edith will receive 9,000 shares. Which transactions will qualify for no recognition?
A. Only the first transaction will qualify for non-recognition.
B. Both transactions will qualify under Sec. 351 if they are part of the same plan of
incorporation.
C. Only the second transaction will qualify for non-recognition.
D. Because of the step transaction doctrine neither transaction will qualify.
11) Matt and Sheila form Krupp Corporation. Matt contributes property with a FMV of $55,000
and a basis of $35,000. Sheila contributes property with a FMV of $75,000 and a basis of
$40,000. Matt sells his stock to Paul shortly after the exchange. The transaction will
A. not qualify under Sec. 351
B. qualify under Sec. 351 only if an advance ruling has been obtained
C. qualify under Sec. 351 if Matt can show the sale to Paul was not part of a prearranged
plan
D. qualify with respect to Sheila under Sec. 351 whether Matt qualifies or not
12) Identify which of the following statements is true.
A. A transferor's gain or loss that goes unrecognized when Sec. 351 applies is
permanently exempt from taxation.
B. If a taxpayer transfers property and services as part of a transaction meeting the Sec.
351 requirements, all of the stock received is counted in determining whether the property
transferors have acquired control.
C. If a taxpayer transfers property and services as part of a transaction meeting the Sec.
351 requirements, the non-recognition of gain or loss will apply to the services.
4. D. All are false.
13) Identify which of the following statements is false.
A. A corporation's fiscal year generally must end on the last day of the month.
B. A corporation's first tax year may not cover a full 12-month period.
C. A fiscal year may not end on December 31.
D. A new corporation can elect a fiscal year that runs from February 16 to February 15
of the following year.
14) Identify which of the following statements is true.
A. A corporation that accrues compensation payable to an employee must pay the
amount within two and one-half months after the close of the taxable year to deduct the amount
in the year of the accrual.
B. Accrued compensation that is deductible in the year of accrual is considered to be
part of an IRS deferred compensation plan.
C. Accrued compensation not paid within three and one-half months after the close of
the corporation tax year is deducted in the year following the accrual.
D. All are false.
15) Identify which of the following statements is true.
A. A corporate NOL can be carried back 2 years and forward 15 years.
B. All are false.
C. An election to forgo an NOL carry back must be made on or before the return due
date (including extensions) for the year in which the NOL is incurred.
D. In computing an NOL for the current year, a deduction is allowed for NOLs from
previous years.
16) Trail Corporation has gross profits on sales of $140,000 and deductible expenses of
$180,000. In addition, Trail has a net capital gain of $60,000. Trail's taxable income is
A. $20,000 loss
B. $20,000
C. $40,000 loss
5. D. $60,000
17) Richards Corporation has taxable income of $280,000 calculated before the charitable
contribution deduction and before its dividends-received deduction of $34,000. Richards makes
cash contributions of $35,000 to charitable organizations. What is Richards Corporation's
charitable contribution deduction for the current year?
A. $24,600
B. $35,000
C. $28,000
D. $31,400
18) Edison Corporation is organized on July 31. The corporation starts business on August 10.
The corporation adopts a November 30 fiscal year end. The following expenses are incurred
during the year:
Date Type Amount
6-30 Attorneys fees associated with obtaining charter $10,000
7-10 Underwriter fees for stock sale 25,000
7-15 Transfer cost for property contributed to the corporation for stock 3,000
6-30 Costs of organizational meetings 2,000
12-6 Legal fees to modify charter 4,000
What is the maximum amount of organizational expenditures that can be deducted by the
corporation for its first tax year ending November 30?
A. $16,000
B. $800
C. $12,000
D. $5,156
6. 19) Which of the following items are tax preference items for purposes of arriving at alternative
minimum taxable income?
A. Excess intangible drilling costs on oil and gas properties
B. Excess of net long-term capital gains over short-term capital losses
C. Interest income earned on federal obligations
D. All depreciation claimed on pre-1987 real property acquisitions
20) Which of the following is not an adjustment in calculating AMTI?
A. Gain on instalment sales of non-inventory property
B. The difference between the gains for AMTI and regular tax purposes
C. The regular tax NOL deduction
D. Production activities deduction
21) When computing a corporation's alternative minimum taxable income, its taxable income is
A. only increased (never decreased) by tax preference items
B. increased by 75% of the excess of adjusted current earnings over taxable income
C. only increased (never decreased) by adjustments
D. increased by the statutory exemption of $40,000
22) Boxer Corporation buys equipment in January of the current year with a 7-year class life for
$15,000. The corporation expensed the $15,000 under Sec. 179. The deduction in the year of
purchase for E&P purposes due to the acquisition and expensing of the equipment is
A. $1,500
B. $15,000
C. $3,000
D. $14,000
7. 23) For purposes of determining current E&P, which of the following items cannot be deducted
in the year incurred?
A. Charitable contribution in excess of the 10% limitation
B. Dividends-received deduction
C. Capital losses in excess of capital gains
D. Life insurance premiums (in excess of the increase in cash surrender value for the
policy) paid on the lives of key employees
24) identify which of the following increases Earnings & Profits.
A. A capital contribution
B. Life insurance proceeds payable to the spouse
C. Tax-exempt interest income
D. All of these increase E & P of a corporation.
25) Identify which of the following statements is true.
A. If both the current and accumulated E&P have deficit balances, a corporate
distribution cannot be characterized as a dividend.
B. The shareholder's basis in property received in a non-liquidating distribution is the
property's FMV reduced by liabilities assumed by the shareholder.
C. A corporation recognizes gain when distributing money as a dividend to its
shareholders.
D. All are false.
26) Poppy Corporation was formed 3 years ago. Poppy's E&P history is as follows:
Year Current E&P Distributions
2005 $6,000 $4,000
2006 5,000 1,000
2007 1,000 -0-
Poppy Corporation's accumulated E&P on January 1 will be
8. A. $0
B. $12,000
C. $7,000
D. $5,000
27) Identify which of the following statements is true.
A. Section 179 property must be expensed ratably over a 5-year period when computing
E&P.
B. Losses on property sales to related parties are not deductible when computing E&P.
C. Distributions made out of accumulated E&P are allocated ratably between multiple
distributions made during the tax year.
D. All are false.
28) Hogg Corporation distributes $30,000 to its sole shareholder, Ima,s. At the time of the
distribution, Hoggs' E&P is $14,000 and Ima's basis in her stock is $10,000. Ima's gain from this
transaction is
A. $6,000 capital gain
B. $30,000 capital gain
C. $14,000 capital gain
D. $20,000 capital gain
29) Wills Corporation, which has accumulated and current E&P totaling $65,000, distributes
land to its sole shareholder, an individual. The land has a FMV of $75,000 and an adjusted basis
of $55,000. The shareholder assumes a $15,000 liability associated with the land. The
shareholder will recognize
A. $60,000 of dividend income and have a $60,000 basis in the land
B. $65,000 of dividend income and have a $65,000 basis in the land
C. $65,000 of dividend income and have a $75,000 basis in the land
D. $60,000 of dividend income and have a $75,000 basis in the land
9. 30) Crossroads Corporation distributes $60,000 to its sole shareholder Harley. Crossroads has
earnings and profits of $55,000 and Harley's basis in her stock is $20,000. After the distribution,
Harley's basis is
A. $5,000
B. $15,000
C. $20,000
D. $60,000
31) Joshua owns 100% of Steeler Corporation's stock. Joshua's basis in the stock is $8,000.
Steeler Corporation has E&P of $40,000. If Steeler Corporation redeems 60% of Joshua's stock
for $50,000, Joshua must report dividend income of
A. $0
B. $8,000
C. $40,000
D. $50,000
32) Which of the following is not a reason for a stock redemption?
A. desire by remaining shareholders to retain control
B. desire by shareholders to reduce the corporate tax liability
C. Redemption of shares is a good corporate investment.
D. No outside market exists for the stock.
33) Which of the following is not a condition that permits a stock redemption to be treated as a
sale?
A. It provides funds for payment of income taxes.
B. It is not essentially equivalent to a dividend.
C. The redemption is substantially disproportionate.
D. The redemption completely terminates the shareholder's interest.
34) The definition of a partnership does not include
A. a syndicate
10. B. a group
C. a pool
D. All are included
35) Identify which of the following statements is true.
A. All of the partners in a limited partnership have limited liability.
B. A limited partnership must have at least two general partners.
C. A limited partnership cannot have a corporate general partner.
D. All are false.
36) Which one of the following individuals or entities is ineligible to be an S corporation
shareholder?
A. An estate
B. Resident alien of the United States
C. A voting trust where all of the beneficiaries are U.S. citizens
D. A partnership where all of the partners are U.S. citizens
37) Identify which of the following statements is true.
A. An election for an S corporation to use the Sec. 179 expensing election is made by
the corporation and not by its shareholders.
B. The S corporation's separately stated items are in general the same ones that apply in
partnership taxation.
C. An S corporation cannot claim a dividends-received deduction.
D. All are true.
38) In computing the ordinary income of a partnership, a deduction is allowed for
A. net Sec. 1231 losses
B. bad debts
C. foreign income taxes paid
D. charitable contributions
11. 39) Cactus Corporation, an S Corporation, had accumulated earnings and profits of $100,000 at
the beginning of 2008. Tex and Shirley each own 50% of the stock. Cactus does not make any
distributions during 2008, but had $200,000 of ordinary income. In 2009, ordinary income was
$100,000 and distributions were $100,000. What is Tex's ordinary income for 2009?
A. $0
B. $50,000
C. $100,000
D. $200,000
40) Identify which of the following statements is true.
A. Distribution of partnership income in the form of cash to partners is generally tax-
free to the partners and the partnership.
B. When partners receive cash distributions from the partnership, they pay taxes on
those distributions.
C. If money distributions exceed the partner's basis in the partnership interest, a partner
would have to recognize gain on a distribution from the partnership. Such gain is usually an
ordinary gain.
D. All are true.
41) On the first day of the partnership's tax year, Karen purchases a 50% interest in a general
partnership for $30,000 cash and she materially participates in the operation of the partnership
for the entire year. The partnership has $40,000 in recourse liabilities when Karen enters the
partnership. Partners share the economic risk of loss from recourse liabilities in the same way
they share partnership losses. There is no minimum gain related to the nonrecourse liability.
During the year the partnership incurs a $120,000 loss and a $20,000 increase in liabilities. How
much of the loss can Karen report on her tax return for the current year?
A. $30,000
B. $40,000
C. $50,000
D. $60,000
42) George pays $10,000 for a 20% interest in a general partnership which has recourse
liabilities of $20,000. The partners share the economic risk of loss from recourse liabilities in the
same way they share partnership losses. George's basis in his partnership interest is
12. A. $10,000
B. $12,000
C. $14,000
D. $30,000
43) Identify which of the following statements is true.
A. If a partner sells property received in a partnership distribution for a gain and the
property was inventory in the hands of the distributing partnership, the partner will always
recognize ordinary income.
B. The primary purpose of Sec. 751 is to prevent partnerships from converting capital
gains into ordinary income.
C. Unrealized receivables include rights to payments on the sale of a capital asset.
D. All are false.
44) Identify which of the following statements is true.
A. If a partnership asset with a deferred pre-contribution gain is distributed in a non-
liquidating distribution to the partner who contributed the asset, the pre-contribution gain must
be recognized by the partner.
B. The partner's basis in the partnership interest is normally reduced by the FMV of
property distributed in a non-liquidating distribution.
C. When a current distribution from a partnership reduces the basis of the partnership
interest to zero, the partner's interest in the partnership is terminated.
D. All are false.
45) For purposes of Sec. 751, inventory includes all of the following EXCEPT
A. capital assets or 1231 property
B. items held for sale in the ordinary course of business
C. accounts receivable
D. All of the above are inventory per Sec. 751
46) Identify which of the following statements is false.
13. A. A C corporation short year income tax liability must be determined on an annualized
basis.
B. If the termination of an S election is considered to be inadvertent, then the election is
permitted to continue in place as if the termination had never occurred.
C. If an S election is terminated and the termination is not considered to be inadvertent,
a 10-tax-year waiting period is required before making a new election.
D. A corporation can obtain relief for a late S election if the IRS consents.
47) Identify which of the following statements is true.
A. All of the shareholders of an S corporation must consent to a revocation of the S
election.
B. A revocation of an S corporation election can be retrospective to any date.
C. An S election will not be terminated due to excess passive income if the corporation
does not have Subchapter C E&P.
D. All are true.
48) On June 30 of the current year, the S election of Great Corporation is terminated thus
creating a 6-month S short year and a 6-month C short year. Great Corporation is a calendar-year
taxpayer. The S short year return is due
A. September 15
B. December 15
C. March 15 of the next year
D. June 30 of the next year