Question 1

When a taxpayer with average annual gross receipts in excess of $25 million finances the construction of its building by borrowing, the interest is added to the cost of the building.

Accepted Answer

A) True 
 B)False

Question 2

Father sold land to Son for $500,000 in 2019. Father's basis in the land was $100,000. Son paid Father $50,000 and gave Father a note for $450,000 due in 2022. In 2020, Son sold the land for $600,000 cash. The note bore interest at the appropriate Federal rate and both Father and Son held the land as an investment.

Accepted Answer

A)   Father must recognize $400,000 of income in 2020.
B)   The installment method is not permitted because this is a related-party transaction.
C)   Father's gain is all ordinary income.
D)   Father must recognize a $360,000 gain in 2020.
E)   None of these.F) D) and E)
G) B) and D)

Question 3

In the case of a sale reported under the installment method, gain is recognized in each year the seller collects on the installment contract.

Accepted Answer

A) True 
 B)False

Question 4

A C corporation is required to annualize certain tax factors:

Accepted Answer

A)   The first year the corporation is in existence, if the first tax return includes less than 12 months.
B)   The last year the corporation is in existence.
C)   The year the corporation changes its tax year.
D)   When there has been a greater than 50% change in the ownership of the stock.
E)   All of these.F) C) and E)
G) A) and C)

Question 5

Gray Company, a calendar year taxpayer, allows customers to return defective merchandise for a full refund within 30 days of the purchase. In 2019, the company refunded $400,000 for claims involving sales. The $400,000 consisted of $350,000 in refunds from 2019 sales and $50,000 in refunds from 2018 sales. All of the refunds from 2018 sales were for claims filed in 2018 and were paid in January and February 2019. At the end of 2019, the company had $12,000 in refund claims for sales in 2019 for which payment had been approved. These claims were paid in January 2019. Also in January 2020, the company received an additional $30,000 in claims for sales in 2019. This $30,000 was paid by Gray in February 2020. With respect to the above, Gray can deduct:

Accepted Answer

A)   $350,000 in 2019.
B)   $362,000 in 2019.
C)   $392,000 in 2018.
D)   $442,000 in 2019.
E)   None of these.F) C) and D)
G) None of the above

Question 6

A C corporation's selection of a tax year generally is independent of the tax year of its principal shareholders.

Accepted Answer

A) True 
 B)False

Exam 16: Accounting Periods and Methods

A C corporation is required to annualize certain tax factors:

Correct Answer
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Correct Answer
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Correct Answer
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When a taxpayer with average annual gross receipts in excess of $25 million finances the construction of its building by borrowing, the interest is added to the cost of the building.

Correct Answer
verified

In the case of a sale reported under the installment method, gain is recognized in each year the seller collects on the installment contract.

Correct Answer
verified

A C corporation's selection of a tax year generally is independent of the tax year of its principal shareholders.

Correct Answer
verified

Exam 16: Accounting Periods and Methods

A C corporation is required to annualize certain tax factors:

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

When a taxpayer with average annual gross receipts in excess of $25 million finances the construction of its building by borrowing, the interest is added to the cost of the building.

Correct AnswerverifiedShow Answer

In the case of a sale reported under the installment method, gain is recognized in each year the seller collects on the installment contract.

Correct AnswerverifiedShow Answer

A C corporation's selection of a tax year generally is independent of the tax year of its principal shareholders.

Correct AnswerverifiedShow Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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