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ACCT 261 Review Lists Fall 2008

ACCT 261 Review Lists Fall 2008 - Review list ACC261 EXAM 5...

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Review list ACC261 EXAM 5, 6, 10 & 13 1. The taxpayer's marginal tax bracket is 35% what would the taxpayer prefer between taxable income and tax exempt interest? 2. Carin, a widow, elected to receive the proceeds of a $100,000 life insurance policy on the life of her deceased husband in 10 installments of $15,000 each. Her husband had paid premiums of $75,000 on the policy. In the first year, Carin collected $15,000 from the insurance company. She must include in gross income: 3. Ben was diagnosed with a terminal illness. His physician estimated that Ben would live no more than 18 months. After he received the doctor’s diagnosis, Ben cashed in his life insurance policy to pay some medical bills. Ben had paid $12,000 in premiums on the policy, and he collected $50,000, the cash surrender value of the policy. Henry enjoys excellent health, but he cashed in his life insurance policy to purchase a new home. He had paid premiums of $12,000 and collected $50,000 from the insurance company. 4. A scholarship recipient at City University must include in gross income the scholarship proceeds used to pay for: 5. Jena is a full-time student at State University and is claimed by her parents as a dependent. Her only source of income is an $8,000 scholarship ($800 for books, $3,800 tuition, $200 student activity fee, and $3,200 room and board). Jena’s gross income for the year is: 6. Theresa sued her former employer for age, race, and gender discrimination. She claimed $250,000 in damages for loss of income and $500,000 in punitive damages. She settled the claim for $600,000. As a result of the settlement, Theresa must include in gross income: 7. Employers of the Family Bowling Alley allow their employees to bowl without charge after the employee’s working hours and when there are adequate idle bowling lanes. Tom bowled 12 games during the month at no charge when the non-employee charge was $3.00 per game. 8. Kristen’s employer owns its building and provides parking space for its employees. The value of the free parking is $150 per month. Karen’s employer does not have parking facilities, but reimburses its employee for the cost of parking in a nearby garage, up to $150 per month. 9. A U.S. citizen worked in a foreign country for the period July 1, 2009 through August 1, 2010. Her salary was $10,000 per month. Also, in 2009 she received $5,000 in dividends from foreign corporations (not qualified dividends). No dividends were received in 2010. Which of the following is correct? 10. Heather’s interest and gains on investments for 2010 were as follows: Interest on Bland County school bonds $500 Interest on U.S. government bonds 600 Interest on a Federal income tax refund 100 Gain on the sale of Bland County school bonds 400 Heather’s gross income from the above is: 11. Gold Company was experiencing financial difficulties, but was not bankrupt or insolvent. The National Bank, which held a mortgage on other real estate owned by Gold, reduced the principal from $110,000 to $85,000. The bank had made the loan to Gold when it purchased the real estate from Silver, Inc. Pink, Inc., the holder of a mortgage on Gold’s building, agreed to accept $40,000 in full payment of the $55,000 due. Pink had sold the
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