Other

Question 1

What is the format for research format?

Answer 1

708 - IRS Section
708(b) - IRS subsection
708(b)(2) - IRS Paragraph
708(b)(2)(A) - IRS Subparagraph

Question 2

Who makes up the Public Company Accounting Oversight Board?

Answer 2

The board is composed of 2 CPA’s and 3 nonCPA’s none who receive profits in an accounting firm and the chairman may be a CPA provided he has not practice as a cpa for 5 years

Question 3

Dan owes debts to 4 different creditors. To satisfy these debts, Dan transfers his property to cash and pays it to all of the creditors on a pro rata basis. If all of the creditors only receive partial pmt of the amounts due:

1. the debtor will not be released from liability for the balance due unless the trustee agrees to the release.
2. the debtor will be released from liability for the balance due unless the creditors expressly reserve the right to collect the full amt.
3. the debtor will not be released for the balance due because an assignment for the benefit of creditors does not require the consent of the creditors
4. the debtor will be released for the balance due since this is a composition agreement

Answer 3

3. the debtor will not be released for the balance due because an assignment for the benefit of creditors does not require the consent of the creditors.

Question 4

According to the profession’s ethical standards an auditor would be considered independent in which of the following instances?

1. The client owes the auditor fees for > 2 yrs prior to the issuance of the audit report
2. the auditor is the officially appointed stock transfer agent of the client
3. The auditor’s checking account, which is fully insured by a federal agency, is held at a client financial institute
4. The client is the only tenant in a commercial building owned by the auditor

Answer 4

3. The auditor’s checking account, which is fully insured by a federal agency, is held at a client financial institute

Question 5

For the entire year, 20x1, Ral Supermarket Inc conducted its business operations without any permanent or FT EE. Ral employed temporary and PT workers during each of the 52 weeks in the year. Under the provision of the FUTA, which of the following stmts is correct regarding Ral’s obligation to file FUTA for 20x1?

1. Ral must file a 20x1 FUTA return only if aggregate wages exceed $100,000 during the year
2. Ral does not have to file because it had no permanent or FT EE
3. Ral must file a return because it had at least one EE during at least 20 weeks of the year
4. Ral is obligated to file a return if at least one worker earned $50 or more in any calendar quarter

Answer 5

3. Ral must file a return because it had at least one EE during at least 20 weeks of the year

Question 6

On May 2, Lace Corp, an appliance wholesaler, offered to sell appliances worth $3,000 to Parco Inc, a household appliances retailer. The offer was signed by Lace’s president, and provided that it would not be withdrawn before June 1. It also included the shipping terms: “FOB - Parco’s warehouse”. On May 29, Parco mailed an acceptance of Lace’s offer. Lace rec’d the acceptance on June 2.
Risk of loss for the appliances will pass to Parco when they are:
1. accepted by Parco
2. identified to the contract
3. tendered at Parco’s warehouse
4. shipped by Lace

Answer 6

3. Ral must file a return because it had at least one EE during at least 20 weeks of the year

Question 7

Sumner, a single individual, had a NOL of $20,000 3 yrs ago. A Section 1244 stock loss made up 3/4 of that loss. Sumner had no taxable income from that year until the current year. In the current year, Sumner has gross income of $80,000 and sustains another loss of $50,000 on Section 1244 stock. Assuming that Sumner can carry the entire $20,000 NOL to the current year, what is the amount and character of the Section 1244 loss that Sumner can deduct for the current year?

1. $35,000 ordinary loss
2. $50,000 capital loss
3. $50,000 ordinary loss
4. $35,000 capital loss

Answer 7

3. $50,000 ordinary loss
   The total loss for the current year = $70,000 which is the $20,000 loss carryover + current year loss of $50,000. However, Section 1244 has a limit of $50,000/yr. Therefore, the total loss of $70,000, $50,000 will be allowed Section 1244 status and will be treated as an ordinary loss

Question 8

What is a corporations dividends-received deduction if it owns less than 20% interest?

Answer 8

70%

Question 9

What is a corporations dividends-received deduction if it owns 20% or more but less than 80% interest?

Answer 9

80%

Question 10

What is a corporations dividends-received deduction if it owns 80% or more interest?

Answer 10

100%

Question 11

Beta, a C corp, reported the following items of income and expenses for the year:
Gross income $600,000
Dividend income from 30% owned domestic corp $100,000
Operating expense $400,000
What is Beta’s taxable income for the year?

Answer 11

$220,000
Income    $600,000
expenses - $400,000
dividend inc  $100,000
net income = $300,000
dividend received deduction (100,000 x 80%)  - $80,000

Question 12

Robert had current year adj gross income of $100,000 and potential itemized deductions as follows:
Medical expenses (before % limitation) $12,000
State income taxes $4,000
RE taxes $3,500
Qual residence mort interest $10,000
Home equity mort interest $4,500
Char contrib (cash) $5,000
What are Robert’s itemized deductions for the AMT?

Answer 12

$17,000
Medical exp   $12,000
Med % limitation  -$10,000
Qual mort interest    $10,000
Char contrib    $5,000
AMT itemized deductions   $17,000

Question 13

A violation of the professional’s ethical standards least likely would have occurred when a CPA:

1. purchased another CPA’s acctg practice and based the price on a % of the fees accruing from clients over a 3 yr period
2. had a public acctg practice and also was president and sole stockholder of a corporation that engages=d in data processing services for the public
3. formed an association - not a partnership - with two other sole practitioners and called the association “Adams, Betts & associates”
4. received a % of the amounts invested by the CPA’s audit clients in a tax shelter with the client’s knowledge and approval

Answer 13

1. purchased another CPA’s acctg practice and based the price on a % of the fees accruing from clients over a 3 yr period

Question 14

An appliance seller promises a restaurant owner that a home dishwasher would fulfill the dishwashing requirements of a large restaurant. The dishwasher was purchased but it was not powered enough for the restaurant. Under the Sales Article of the UCC, what warranty was violated?

1. the implied warranty of merchantability
2. the express warranty that the goods conform to the seller’s promise
3. the implied warranty of marketability
4. the express warranty against infringement.

Answer 14

2. the express warranty that the goods conform to the seller’s promise

Question 15

Robin Corp incurred substantial operating losses for the past 3 years. Unable to meet its current obligations, Robin filed a petition for reorganization under Chapter 11 of the Federal Bankruptcy code. Which of the following statements is correct?

1. the reorganization plan may only be filed by Robin
2. a creditor’s committee, if appointed, will consist of unsecured creditors
3. Robin may contine in business only with the approval of a trustee
4. The creditors’ committee must select a trustee to manage Robin’s affairs

Answer 15

2. a creditor’s committee, if appointed, will consist of unsecured creditors

Question 16

Opal Corp declared a 9% stock dividend on its common stock. The dividend:

1. has no effect on Opal’s earnings & profits for federal income tax purposes
2. must be registered with the SEC pursuant to the Securities Act of 1933
3. requires a vote of Opal’s stockholders
4. in includible in the gross income of the recipient taxpayer in the year of receipt

Answer 16

1. has no effect on Opal’s earnings & profits for federal income tax purposes

Question 17

In the current year, Fitz, a single taxpayer, sustained a $48,000 loss on Section 1244 stock in JJJ Corp a qualifying business corp and a $20,000 loss of Section 1244 stock in MMM corp, another qualifying small business corp. What is the maximum amout of loss that Fitz can deduct for the current year?

Answer 17

$50,000 ordinary loss and $18,000 capital loss
$48,000 loss
+ $20,000 loss
= $68,000 total loss
- $50,000 ordinary loss
= $18,000 capital loss
The taxpayer is allowed to deduct a max of $50,000 as an ordinary loss under IRC Section 1244

Question 18

Under the Clean Air Act, the best available control technology BACT is the emission limitation that achieves the maximum reduction of pollutant without considering which of the following factors?

1. economic factors
2. energy factors
3. environmental factors
4. population factors

Answer 18

4. population factors

Question 19

In a type B reorganization, as defined by the IRC:
1. the stock of the target corp is acquired solely for the voting stock of either the acquiring corp or its parent
2. the acquiring corp must have control of the target corp immediately after the acquisition
Which one is correct?

Answer 19

Both 1 & 2

Question 20

Under the UCC secured Transactions article, which of the following actions will best perfect a security interest in a negotiable instrument against any other party?

1. obtaining a duly executed financing statement
2. perfecting the attachment
3. taking possession of the instrument
4. filing a security agreement

Answer 20

3. taking possession of the instrument

Question 21

Which of the following statements best states the purpose of cumulative voting?

1. to assure that a majority of shares voted elects the entire board of directors
2. to allow minority shareholders to gain representation of the board of directors
3. to assure the continuance of incumbent directors
4. to allow for the election of 1/3 of the board of directors each year

Answer 21

2. to allow minority shareholders to gain representation of the board of directors

Question 22

Business equipment purchased in tax year 2013 had available 3 methods of cost recover:
1. MACRS depreciation
2. 50% bonus depreciation
3. Section 179 expensing
In what order should these methods of cost recovery be applied to calculate the deduction?

Answer 22

First, Section 179
Second, 50% bonus
last, MACRS

Question 23

Which of the following organizations would not qualify for exemption from federal income tax?

1. social clubs that allow only limited usage by general public
2. fraternal society not operating under a lodge system
3. college alumni assoc
4. political organization

Answer 23

2. fraternal society not operating under a lodge system

Question 24

Which of the following services is a CPA generally required to perform when conduction a personal financial planning engagement?

1. assisting the client to identify tasks that are essential in order to act on planning decisions
2. assisting the client to take action on planning decisions
3. monitoring progress in achieving goals
4. updating recommendations and revising planning decisions

Answer 24

1. assisting the client to identify tasks that are essential in order to act on planning decisions

Question 25

Where the parties have entered into a written contract intended as the final expression of their agreement, which of the following agreements will be admitted into evidence because they are not prohibited by the parol evidence rule?

1. both subsequent oral agreements and prior written agreements
2. prior written agreements
3. subsequent oral agreements
4. neither subsequent oral agreements nor prior written agreement

Answer 25

3. subsequent oral agreements

Question 26

Easel Co has elected to reimburse EE for business expenses under a nonaccountable plan. Easel does not allow EE to keep any amount not spent. Under the plan, Mel, an Easel EE for a full year, get $400/month for business auto exp. At the end of the year, Mel informs Easel that the only business exp incurred was for business mileage of 12,000 at a rate of 56.5 cents per mile. Mel encloses a check for $480 to refund the overpayment to Easel. What amount should be reported in Mel’s gross income for the year?

Answer 26

$4,800
Had this been an accountable plan, none of the money would be included in the EE’s income. Since no accountability is required by the ER for these expenses.
Under a nonaccountable plan, all expense payements received are reported in Box 1 on the W-2.
So the entire $4,800 is reported as income.

Question 27

Tom Lewis, an individual taxpayer, paid an annual personal property tax amount based on the total weight of his auto in 2013. Select the appropriate tax treatment of Tom’s 2013 return.

1. Deductible on Sch A - itemized deductions subject to a threshold amount of 2% of AGI
2. Deductible on Sch A - itemized deductions subject to a $500 floor and a threshold amount of 10% of AGI
3. not deductible on Form 1040
4. . Deductible on Sch A - itemized deductions

Answer 27

3. not deductible on Form 1040
   Payment for registration and licensing of a car may be deductible as a personal property tax only if it is imposed annually and assessed in proportion to the value of the car.

Question 28

Name 6 Corporate debt securities (hint: types of bonds)

Answer 28

1. Registered Bonds
2. bearer bonds
3. debenture bonds
4. mortgage bonds
5. redeemable bonds
6. convertible bonds

Question 29

What is a warrant?

Answer 29

Written evidence of a stock option which grants its owner the option to purchase a specified amount of shares of stock at a stated price within a specified period of time.

Question 30

What is a watered stock?

Answer 30

when stock is acquired by exchanging cash or property worth less than the par or stated value of the stock.