This document contains a link to a tutorial and discussion questions about accounting methods available to small and large businesses. It then provides 17 multiple choice questions about tax regulations, business entities, contributions of property to corporations, organizational expenses, and dividends received deductions.

1. Follow the link to get tutorial
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This file ACC 455 Week 2 Discussion Question 2 includes
solutionsto the following task: "What methods of accounting
are availableto a small business and to a large business? If
the business decides to make an accounting methods change,
how is this accomplished?"
General Questions - General General Questions
1) Which of the following statements regarding proposed
regulationsis not correct?
A. Proposed and temporary regulationsare generally
issued simultaneously.
B. Proposed regulationsdo not provide any insight into the
IRS's interpretationof the tax law.
C. Proposed regulationsexpire after 3 years.
D. Practitioners and other interested parties may comment
on proposed regulations.
2) Regulationsare
A. presumed to be valid and to have almost the same
weight as the IRC
B. equal in authority to legislationif interpretative
C. equal in authority to legislation
D. equal in authority to legislationif statutory
3) Which of the following courts is not a trial court for tax
cases?

2. A. U.S. Tax Court
B. U.S. Court of Federal Claims
C. U.S. Bankruptcy Court
D. U.S. District Court
4) Which of the following statements is incorrect?
A. Limited partners' liabilityfor partnership debt is limited
to their amount of investment.
B. In a general partnership, all partners have unlimited
liabilityfor partnership debts.
C. In a limited partnership, all partners participatein
managerialdecision-making.
D. All of the statements are correct.
5) Which of the following is an advantageof a sole
proprietorship over other business forms?
A. Low tax rates on dividends
B. Ease of formation
C. Tax-exempt treatment of fringe benefits
D. The deductionfor compensationpaid to the owner
6) Which of the following statements is correct?
A. S shareholdersare taxed on their proportionateshare of
earnings that are distributed.
B. S shareholdersare taxed on their proportionateshare of
earnings whether or not distributed.
C. An owner of a C corporationis taxed on his or her
proportionateshare of earnings.
D. S shareholders are only taxed on distributions.
7) Three members form an LLC in the current year. Which of

3. the following statements is incorrect?
A. The LLC can elect to be taxed as a C corporation with no
special tax consequences.
B. If the LLC elects to use its default classification,it can
elect to change its status to being taxed as a C corporation
beginningwith the third tax year after the initial
classification.
C. The LLC's default classificationunder the check-the-box
rules is as a partnership.
D. The LLC can elect to have its default classification
ignored.
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 unincorporatedbusiness 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 prohibitedfrom
changing its tax classificationat any time in the future.
D. All are false.
9) Identify which of the following statements is true.
A. The check-the-box regulationspermit an LLC to be taxed
as a C corporation.
B. Under the check-the-box regulations, an LLC that has
only two members (owners) default classificationis as a
partnership.
C. Once an electionis made to change its classification, an

4. entity cannot change again for 60 months.
D. All of the statements are true.
10) Rose and Wayne form a new corporation. Rose
contributescash for 85% of the stock and Wayne contributes
services for 15% of the stock. The tax effect is
A. Rose and Wayne are not required to recognize their
realized gains.
B. Wayne must report the FMV of the stock received as
capitalgain.
C. Rose and Wayne must recognize their realized gains, if
any.
D. Wayne must report the FMV of the stock received as
ordinary income.
11) Matt and Sheilaform Krupp Corporation. Matt
contributesproperty with a FMV of $55,000 and a basisof
$35,000. Sheilacontributesproperty 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. qualifywith respect to Sheila under Sec. 351 whether
Matt qualifiesor not
B. qualify under Sec. 351 if Matt can show the sale to Paul
was not part of a prearranged plan
C. not qualifyunder Sec. 351
D. qualifyunder Sec. 351 only if an advance ruling has been
obtained
12) For Sec. 351 purposes the term property does not include
A. inventory
B. accounts receivable

5. C. cash
D. services rendered
13) Identify which of the following statements is true.
A. In computing an NOL for the current year, a deductionis
allowedfor NOLs from previous years.
B. An election to forgo an NOL carryback must be made on
or before the return due date (includingextensions) for the
year in which the NOL is incurred.
C. A corporate NOL can be carried back 2 years and
forward 15 years.
D. All are false.
14) A new corporationmay generally select one of the
following accountingmethods with the exception of
A. retail method
B. accrual method
C. cash method
D. hybrid method
15) Identify which of the following statements is false.
A. A new corporationcan elect a fiscal year that runs from
February 16 to February 15 of the followingyear.
B. A fiscal year may not end on December 31.
C. A corporation's fiscal year generally must end on the last
day of the month.
D. A corporation's first tax year may not cover a full 12-
month period.
16) Edison Corporationis organized on July 31. The
corporation starts business on August 10. The corporation

6. adoptsa November 30 fiscal year end. The following
expenses are incurred during the year:
Date Type Amount
6-30 Attorneys fees associated with obtainingcharter
$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 organizationalmeetings 2,000
12-6 Legal fees to modify charter 4,000
What is the maximum amount of organizationalexpenditures
that can be deducted by the corporation for its first tax year
ending November 30?
A. $5,156
B. $12,000
C. $16,000
D. $800
17) Maxwell Corporationreports the following results:
Gross income from operations $ 90,000
Dividendsreceived from 18%-owned domestic corporation
70,000
Expenses 100,000
Maxwell's dividends-receiveddeductioni...
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