Chapter 10 Explantion - 1 Explanation For all required filings and furnishings the IRS uses a mailbox rule which provides that any file or furnish

Chapter 10 Explantion - 1 Explanation For all required...

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FFA EA Book Reference: CH 10 Business Entities Subsection: Business expenses deductions and credits
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Subject: Employment Taxes 4. Explanation: If a business manufactures products or purchases them for resale, it generally must value inventory at the beginning and end of each tax year to determine cost of goods sold. Cost of goods sold is deducted from gross receipts to figure gross profit for the year. Administrative salaries and office supplies are not directly related to the cost of the manufactured product and are not part of the cost of goods sold. The following are types of expenses that go into figuring cost of goods sold: The cost of products or raw materials, including freight. Storage Direct labor (including contributions to pension or annuity plans) for workers who produce the products. Factory overhead. Beginning Inventory $0 Raw Materials$35,000 Factory Overhead $6,000 Direct Labor $27,000 Shipping $1,585 Ending inventory ($10,000) Cost of Goods Sold $59,585 Correct Answer: B FFA EA Book Reference: CH 10 Business Entities Subsection: Business income Subject: Cost of goods sold (e.g., inventory practices, expenditures included, uniform capitalization rule) 5. Explanation: To determine whether an individual is an employee or an independent contractor under the
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