tax practice exam 3

tax practice exam 3 - Name: _ Class: _ Date: _ ID: A...

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Name: ________________________ Class: ___________________ Date: __________ ID: A 1 ACCT217 - Sample Exam 2 Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Taupe Corporation is considering deferred compensation plans for its executive employees over age 55. One plan is to allow the employee to make an election at the end of the year to collect his or her bonus when the employee retires, at which time the executive would receive the deferred pay plus 6% interest. a. The interest is original issue discount and must be included in gross income before retirement. b. The employee cannot defer the income (both the bonus and the interest) for tax purposes because it is constructively received each year. c. The employee must recognize the bonus each year, but can defer the interest. d. The bonus and the related interest can be deferred from inclusion in gross income until they are received. e. None of the above. ____ 2. Under the original issue discount (OID) rules as applied to a three-year certificate of deposit: a. The OID will not be included in gross income until the end of the third year. b. The OID will be amortized by the straight-line method (e.g., $75 per year.) c. All of the OID must be recognized as gross income in the first year. d. The interest income for the first year will be less than the interest income for the third year. e. None of the above. ____ 3. Dorothy purchased a certificate of deposit for $10,000 on January 1, 2007. The certificate’s maturity value in two years (December 31, 2008) is $10,816, yielding 4% before-tax interest. a. Dorothy must recognize $400 (.04 $10,000) gross income in 2007. b. Dorothy must recognize $816 gross income in 2008. c. Dorothy must recognize $816 gross income in 2007. d. Dorothy must recognize $408 ($816/2) gross income in 2007 and 2008. e. None of the above. ____ 4. With respect to the prepaid income from services, which of the following is true? a. The treatment of prepaid income is the same for tax and financial accounting. b. A cash basis taxpayer can spread the income over the period services are to be provided if all of the services will be completed by the end of the tax year following the year of receipt. c. An accrual basis taxpayer can spread the income over the period services are to be provided if all of the services will be completed by the end of the tax year following the year of receipt. d. An accrual basis taxpayer can spread the income over the period services are to be provided on a contract for three years or less. e. None of the above.
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Name: ________________________ ID: A 2 ____ 5. As a general rule: I. Income from property is taxed to the person who owns the property. II.
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This note was uploaded on 09/22/2009 for the course ACC 601 taught by Professor Bardon during the Fall '09 term at Utah Valley University.

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tax practice exam 3 - Name: _ Class: _ Date: _ ID: A...

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