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CFP - Income Tax Planning Fundamentals of Income Tax - Accounting Methods and Penalties & Audits (Quizzes) with correct answers respectively.$9.29
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CFP - Income Tax Planning
Fundamentals of Income Tax -
Accounting Methods and Penalties &
Audits (Quizzes) with correct answers
respectively.
D. The client's check is received by the taxpayer. (Cash basis is recognized as income when received)
ANS - A cash basis taxpayer includes income from a service business when:
A. The services are performed.
B. The client is invoiced for the services.
C. The client's check is deposited in the bank.
D. The client's check is received by the taxpayer.
C. Ryan's business is a cash-basis taxpayer; the check is mailed on December 28th of this year, and
received on January 1st. ANS - Ryan is self-employed and owns a sole proprietorship involved in party
planning. He is working a New Year's event. Under what circumstances will the income for this party be
deferred for tax purposes until next year?
A. Ryan's business is an accrual-basis taxpayer; the check is mailed on January 2 of next year, and
received on January 5th.
B. Ryan's business is an accrual-basis taxpayer; the check is mailed on December 31 of this year, and
received on January 2nd.
C. Ryan's business is a cash-basis taxpayer; the check is mailed on December 28th of this year, and
received on January 1st.
D. Ryan's business is a cash-basis taxpayer; the check is mailed on December 28th of this year, and
received on December 31st.
, Accrual-basis; Cash-basis ANS - __________________ taxpayers must recognize the income in the year
the services or goods are provided. Whereas, ____________________ taxpayers will recognize the
income in the year that the payment is actually or constructively received.
C. $60 if she is an accrual basis taxpayer. ANS - Kathy operates a gym. Her customers pay $480 for 48
aerobic classes that can be taken any time in a 24-month period. If Kathy sells one of the agreements to
a customer on June 30 of this year, and the customer takes six lessons during the year, how much of the
income is Kathy required to recognize as income on this year's taxes?
A. $480 if she is a cash or accrual basis taxpayer.
B. $240 if she is an accrual basis taxpayer.
C. $60 if she is an accrual basis taxpayer.
D. $120 if she is a cash basis taxpayer.
B. Either cash or accrual (Since Scary Berries is a qualifying small business taxpayer with average gross
receipts below $26 million (for 2021), they can choose to use the cash basis or the accrual basis
accounting method.) ANS - Scary Berries, Inc. is a C corporation that specializes in carving berries into
frightening images. The company's primary profit generation is the sale of berries and they generate $4
million in annual revenue on average. What accounting method may Scary Berries, Inc. utilize for tax
purposes?
A. Cash basis
B. Either cash or accrual
C. Accrual Basis
D. Units of production
C. The check is received by the seller. ANS - Under the cash basis method of accounting the seller
recognizes income when:
A. The check is drawn by the payor (buyer).
B. The check is deposited by the seller.
C. The check is received by the seller.
D. The receipt must be in currency; checks are not recognized as cash receipts.
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