LSU ACCT 3221 Chapter 3 | Questions with 100% Correct Answers True/False: For tax purposes, income is recognized if the transaction meets three conditions: economic benefit, occurrence and completion, and not exempt from tax. True True/False: Marie performed bookkeeping services for Donald chargi...
True/False: For tax purposes, income is recognized if the transaction meets three
conditions: economic benefit, occurrence and completion, and not exempt from tax.
True
True/False: Marie performed bookkeeping services for Donald charging him $350.
Donald agreed that he would pay Marie's credit card bill for the same amount. Marie has
received an economic benefit and must report $350 in income on her tax return.
True
True/False: John owns 200 shares of Coca Cola common stock that have increased in
value by $5 each. He must report the increase in income because a transaction has
occurred.
False
True/False: If the process of a transaction begins and ends with an economic benefit for
the taxpayer, he or she must report it in income even though the income is specifically
exempt from tax.
False
True/False: Almost all individuals use the cash receipts and disbursements method of
accounting.
True
True/False: Constructive receipt means the income is available to or in the control of the
taxpayer regardless of whether the taxpayer chooses to utilize the income.
True
True/False: Income can only be realized in money or services.
False
True/False: If Marc, an accountant, agrees to provide tax services to a neighbor in
exchange for the neighbor agreeing to fix his pool, Marc but not his neighbor will have to
report income on this transaction at fair market value.
False
True/False: There are some instances where a cash-basis taxpayer can report income
as though he or she is an accrual basis taxpayer.
True
True/False: For most individuals, interest income comes from interest-earning deposits
at banks, savings and loans, or credit unions.
True
, True/False: If an individual owns Series EE bonds, this person must report interest
income, i.e., the increase in bond value on an annual basis.
False
True/False: A taxpayer can exclude from gross income any interest earned on bonds
issued by any state, any possession of the United States, any political subdivision of
either of the foregoing, or of the District of Columbia as long as these bonds are not
issued for private activities.
True
True/False: Interest on state bonds is tax- exempt if the bonds were issued for private
activities, such as convention centers, industrial parks, or stadiums.
False
True/False: A taxpayer must file a Schedule B (Forms 1040A or 1040) if he or she has
received taxable interest of $1,550.
True
True/False: Dividends are generally taxed at capital gains rates if they are made from
the corporation's current earnings and profits or accumulated earnings and profits.
True
True/False: A stock dividend in which a shareholder has the option to receive cash is
not taxable.
False
True/False: Robert received a tax refund in 2009 from his state, which he deducted on
his prior year's return as an itemized deduction. He must report the refund in income in
2009, subject to certain computations to determine the amount that is taxable.
True
True/False: All federal and state unemployment compensation benefits are not subject
to income tax.
False
True/False: The taxability of social security benefits depends on the "provisional
income" and filing status of the taxpayer.
True
True/False: Jury duty pay is taxable income but it can be deducted from gross income if
the amount must be given to the employer.
True
True/False: Discounts provided to employees for food by a restaurant owner are not
taxable if the discounts do not exceed the gross profit percentage of the business.
True
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