Ch13TB - 711 Chapter 13 Tax Accounting TRUE-FALSE...

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© 2009 CCH. All Rights Reserved. Chapter 13 711 Chapter 13 Tax Accounting TRUE-FALSE QUESTIONS—CHAPTER 13 A partnership may adopt any tax year without IRS permission. 1. A corporation f ling its f rst return must “annualize” its income if the tax period is less than 12 months. 2. A taxable year may be as short as one day and may exceed 366 days. 3. Under no circumstances may a corporation change its f scal year without IRS permission. 4. A taxpayer engaged in two or more separate and distinct businesses may use different accounting methods 5. for both businesses. A grocery store may use the cash basis of reporting sales. 6. In general, a CPA on the cash basis method will never have a bad debt deduction. 7. A cash basis taxpayer may deduct prepaid business expenses currently. 8. Both cash and accrual basis taxpayers will be taxed on a dividend when it is actually received. 9. Computing “cost of goods sold”and being on the accrual basis are independent of each other. 10. If, in the IRS’s opinion, the taxpayer’s books do not “clearly re F ect income,” the IRS may revise them so 11. that they do. Taxpayers must generally obtain the permission of the IRS to change accounting methods. 12. A correction of an error in a tax return is usually considered a change in accounting method. 13. The IRS can require a change in accounting methods if the method used by a taxpayer does not clearly 14. re F ect income. IRS permission is not required for a change from FIFO to LIFO. 15. The installment method cannot be used unless the total selling price is known. 16. Repossessions of real property sold on the installment basis are generally nontaxable. 17. The installment sales rules do not apply to sales at a loss. 18.
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712 CCH Federal Taxation—Comprehensive Topics Chapter 13 © 2009 CCH. All Rights Reserved. MULTIPLE CHOICE QUESTIONS—CHAPTER 13 A short tax year with the subsequent annualizing of taxable income is required for which of the following? 19. In the year of death of an individual a. In the year of termination of a partnership b. In the f rst year of a new corporation c. In the year of liquidation of a corporation d. None of the above e. What is the amount of tax to be paid for a short period assuming the tax from placing the short period on an 20. annual basis is $2,300; the tax computation for the short period without annualizing is $2,100; and the tax computation using the full 12 months and prorating is $2,200. $2,300 a. $2,200 b. $2,100 c. $100 d. None of the above e. Which of the following is not a method of accounting? 21. Cash receipts and disbursements method a. Accrual method b. LIFO inventory c. Long-term contracts method d. None of the above e. The following statements about the cash basis method of accounting are false, except:
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Ch13TB - 711 Chapter 13 Tax Accounting TRUE-FALSE...

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