Guide for Quiz 2 - ACCT 351 Guide for Quiz 2 spring 2017...

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Income Tax Fundamentals 2020
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Chapter 8 / Exercise 2
Income Tax Fundamentals 2020
Altus-Buller/Whittenburg
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ACCT 351. Guide for Quiz 2, spring 2017 Quiz 2 will contain about 20 questions from chapters 9 and 10. No cheat sheet is allowed for the quiz. Suggestion for effective exam preparation:1.Review class lectures and examples2.Review practice multiple choice questions for each chapter3.Go over questions in this handout4.Review textbook material, specifically the examples provided in each chapter. See the detailed list below. 5.Work on at least 10 problems for each of chapters 9, 10 on your own without the help of the solution manuals. After completing those problems, compare your answers with solutions provided. When your answers are wrong, you need to study that specific topic in much more detail. Chapter 9:1.Meaning of ordinary, necessary and reasonable expense.2.Deductions not allowed for businesses such as bribes, personal auto expenses, etc.3.Deductibility of mixed motive expenses and meals and entertainment, limited to 50%. Example 9-6/ 4.Specifics of calculating travel expense deduction, domestic and abroad, Example 9-8.5.What if property is used for personal and business purposes? For instance see Example 9-9.6.How to account for bad debt expense under accrual and cash method (see class handout). 7.Domestic production activities deduction, calculation and concepts. Example 9-108.Skip losses on disposition of business property and Example 9-119.Calculation of business casualty and theft loss. Do we use adjusted basis or decline in fair market value as a measure of loss? (See Example 9-12 and Exhibit 9-2. You may skip the middle of Exhibit 9-3 column dealing with property used in Production of Income)10.Skip this topic: Accounting Periods starting on page 9-15 and 9-16.11.Accounting methods. Cash versus accrual (very important: there are differences between tax and financial accounting treatment. It is important that you know all of those. See Exhibit 9-5 on page 9-29 for a summary)12.Cash method:a.What constitutes receipt of income (actual or constructive receipt of cash or noncash payments?b.Generally, revenue is recognized when payment is received (as per a. above) even when goods or services are not delivered.c.Rents received in advance are recognized upon receipt.d.Expenses that are prepaid but are not currently deductible: Capital assets, organizational and startup expenses, prepaid interest.e.Certain prepayment of expenses may be currently deducted if the 12-month rule tests hold (see Example 9-14).This applies to prepayment for insurance, security, rent, and warranty service contracts. f.Cash method taxpayer cannot claim a bad debt expense deduction (see class handout).13.Accrual method Generally, income is recognized when earned. but there are exceptions:-Unearned rent and unearned interest are recognized immediately upon receipt.
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Income Tax Fundamentals 2020
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Chapter 8 / Exercise 2
Income Tax Fundamentals 2020
Altus-Buller/Whittenburg
Expert Verified
-Security deposit on rental property is a liability. Therefore it is not recognized as revenue.

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