MC-Class-Business

MC-Class-Business - BUSINESS INCOME MULTIPLE CHOICE...

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BUSINESS INCOME MULTIPLE CHOICE REQUIRED: Select the most appropriate answer for each of the following from the information provided. 1. XYX Company accrued a bonus to one of its managers on December 31, 20X4 in the amount of $20,000. (a) The bonus must be paid out within 180 days of the year-end or be added back to income for 20X4 . (b) The bonus must be paid out within 180 days of the year-end or be added back to income in 20X5. (c) As long as the bonus is paid out at any time, it will never have to be added back to income. (d) The bonus must be paid out before December 31, 20X5 or it will have to be added back to income in 20X5. (e) None of the above are applicable. 2. John Scott paid $4,000 in 20X6 to a consultant to investigate the suitability of a building site for his proposed motel business. The motel was built, and the business commenced, in 20X7. John must: (a) deduct the $4,000 in 20X6 (b) deduct the $4,000 in 20X7 (c) capitalize the $4,000 in 20X6 (d) capitalize the $4,000 in 20X7 (e) do none of the above 3. John, a self-employed architect, paid golf club dues of $1,800 in 20X9. The membership is solely for business entertaining as John hates golf and only plays to promote his business. He spent $5,000 during the year entertaining prospective clients in the golf club restaurant. John can deduct in 20X9: (a) $6,800 (b) $5,000 (c) $2,500 (d) $1,800 (e) none of the above
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4. Joe S. is the owner-manager of Acme House Building Limited (AHL). Joe paid himself a 20X0 salary of $60,000 (considered a reasonable amount). Sarah, his wife, received a 20X0 salary of $20,000 (also considered reasonable) from AHL for doing the books and some general clerical duties. Joe and Sarah have no other 20X0 income. AHL reported active business income of $540,000 after paying Sarah and Joe. The most appropriate tax strategy would be to: (a) pay the corporate tax on $540,000 (b) declare a bonus to Joe in the amount of $40,000 (c) declare a bonus to Sarah in the amount of $40,000 (d) declare a bonus to both Joe and Sarah in the amount of $20,000 (e) do none of the above 5. When Marnie expanded her health food bakery she secured a bank loan of
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MC-Class-Business - BUSINESS INCOME MULTIPLE CHOICE...

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