CHAPTER 16 ACCOUNTING PERIODS AND METHODS1.
A doctorâs included medical observe could finish the final
day of any month of the 12 months.
b. False 2.
A C company that doesn't have a pure enterprise 12 months
should use a calendar 12 months as its tax 12 months.
b. False A C corporationâs
number of a tax 12 months, typically, is impartial of the tax 12 months of its
d. False three. The DEF Partnership
had three equal companions when it was fashioned. Companions D and E have been calendar
12 months taxpayers and Companion Fâs tax 12 months ended on June 30th earlier than he joined the
partnership. The partnership could use a calendar 12 months and accomplice F could proceed
to make use of the tax 12 months ending June 30th.
b. False four.
The tax 12 months of one of many principal companions could decide
the partnershipâs tax 12 months.
b. False 5. The Seagull Partnership
has three equal companions. Companion Aâs tax 12 months ends June 30th, and Companions B
and C use a calendar 12 months. If the partnership makes use of the calendar 12 months to report
its revenue, Companion A is permitted to defer partnership revenue earned from July
by means of December 2014 till he information his tax return for his 12 months ending June
b. False 6. Pink Company and
Inexperienced Company are equal companions within the R & G Partnership. Pink
Corporationâs tax 12 months ends September 30th, and Inexperienced Company is a calendar
12 months taxpayer. The best mixture deferral of revenue would happen if the
partnership used a calendar 12 months for tax functions.
b. False 7. A CPA observe that
is included earns 40% of its annual revenues within the months of March and
April. Though the CPA observe is an expert providers company (PSC),
it might use a fiscal 12 months ending April 30th.
b. False eight.
The flexibility of the CPA to well timed put together a tax return is a
justification for the partnershipâs use of a specific tax 12 months.
b. False 9. In 2004, a medical
physician who included his observe elected a fiscal 12 months ending September
30th. Throughout the fiscal 12 months ended September 30, 2014, he acquired a wage of
$190,000. Throughout the interval from October 1, 2014 to December 31, 2014, the
company paid the physician a complete wage of $60,000, and paid him $240,000 of
wage within the following 9 months. The corporationâs wage deduction for the
fiscal 12 months ending September 30, 2015, is restricted to $240,000.
b. False 10.Laura Company
modified its tax year-end from July 31st to December 31st in 2014. The revenue
for the interval August 1, 2014 by means of December 31, 2014 was $35,000. The
company tax fee is 15% on the primary $50,000 of revenue, 25% on revenue from
$50,001 to $75,000, and 34% on revenue from $75,001 to $100,000. A portion of
Lauraâs June â December 2014 revenue can be taxed at 34%. a. True
b. False 11.In 2014, T
Company modified its tax 12 months from ending every April 30th to ending every
December 31st. The company earned $60,000 throughout the interval Might 1, 2014
by means of December 31, 2014. The annualized revenue for the brief 12 months is $90,000.
b. False 12.Snow Company
started enterprise on Might 1, 2014, and elected to make use of the calendar 12 months for tax
functions. Brown Company, a calendar 12 months company, offered all of its
property and liquidated as of April 30, 2014. Neither Snow Company nor Brown
Company should annualize their revenue for his or her 2014 returns.
b. False 13.Ted, a money foundation
taxpayer, acquired a $150,000 bonus in 2014 when he was within the 35% marginal tax
bracket. In 2015, when Ted was within the 28% marginal tax bracket, it was
found that the bonus was incorrectly computed, and Ted was required to
refund $40,000 to his employer. On account of the refund, Ted can scale back his
2015 tax legal responsibility by $14,000 (.35 Ã $40,000).
b. False 14.Usually, an
benefit to utilizing the money methodology of accounting, as in comparison with the accrual
methodology, is that underneath the money methodology revenue will not be acknowledged till it's
collected, reasonably than being taxed as quickly because the taxpayer has the appropriate to
accumulate the revenue.
b. False 15.A calendar 12 months, money
foundation company started enterprise on April 1, 2014, and paid $2,400 for a
24-month legal responsibility insurance coverage coverage. An accrual foundation, calendar 12 months taxpayer
additionally started enterprise on April 1, 2014, and bought a 24- month legal responsibility
insurance coverage coverage. The accrual foundation taxpayer should amortize the premiums over 24
months however the money foundation taxpayer could deduct the whole premiums in 2014.
b. False . 16.Alice, Inc., is an S
company that has been in enterprise for 5 years. Its annual gross receipts
have by no means exceeded $1 million. The company operates a retail retailer and
additionally owns rental property. The gross sales from the retail retailer and the rental
revenue could also be reported by the money methodology, until Alice beforehand elected the