Income Taxation Midterm Exam: MC
Which of the following accounting methods is most consistent with the lifeblood
doctrine?
a. Crop year method
b. Installment method
c. Cash basis
d. Accrual method - ✔✔d. Accrual method
Which is not a scheme in taxing income?
a. Ordinary gain taxation c. Capital gains taxation
b. Regular income taxation d. Final income taxation - ✔✔a. Ordinary gain taxation
Which is a correct statement regarding income taxes?
a. An item of income subiected to final tax can still be subject to regular tax.
%
b. An item of income exempted from final tax is nevertheless taxable to regular
tax.
c. An item of income subiected to capital gains tax may be subject to regular
income tax.
d. An item of income exempted from tax is likewise exempt from capital gains tax and
regular income tax. - ✔✔d. An item of income exempted from tax is likewise exempt
from capital gains tax and regular income tax.
Which is not a feature of final tax?
a. Covers certain passive income
b. Covers all capital gains
c. Withholding at source
d. None of these - ✔✔b. Covers all capital gains
,Which of the following properties when classified as capital asset is subject to capital
gains tax?
a. Domestic stocks sold directly to buyer
b. Real property
c. Both a or b
d. None of these - ✔✔c. Both a or b
Capital asset means
a. real properties used in business.
b. personal properties used in business. c.
real properties not used in business.
d. any property, real or personal, not used in business. - ✔✔d. any property, real or
personal, not used in business.
Which is not an item of passive income?
%
a. Royalties
c. Deposit interest income
b. Prizes
d. Professional income - ✔✔d. Professional income
These are accounting techniques or conventions used to measure income
a. Accounting methods
c. Accrual basis
b. Accounting periods
d. Cash basis - ✔✔a. Accounting methods
These are distinct and equal time periods over which income is measured
a. Accounting methods
b. Crop year basis
,c. Accounting periods
d. Cash basis - ✔✔c. Accounting periods
Income is recognized when received rather than when earned
a. Cash basis
b. Accrual basis
c. Installment basis
d. Deferred payment basis - ✔✔a. Cash basis
Income is recognized when earned regardless of when received
a. Cash basis
b. Accrual basis
c. Installment method
d. Percentage of completion - ✔✔b. Accrual basis
Which statement is correct?
%
a. Dealers of real properties can use the installment method without limitation.
b. Dealers of personal properties can use the installment method without limitation.
c. Non-dealer of properties can use the installment method of initial payer exceeds
25% of the selling price.
d. Dealers of properties can use the installment method only if initial payment does not
exceed 25% of the selling price. - ✔✔b. Dealers of personal properties can use the
installment method without limitation.
Initial payment means
a. Downpayment.
b. Total collection within the year the installment sale was made.
, c. Installment payments, exclusive of downpayment, within the year the installment
sale was made.
d. Total collections within one year from the date the installment sale was made. -
✔✔b. Total collection within the year the installment sale was made.
Income is reported by reference to the extent of project completion in
a. Deferred payment method
b. Installment method
c. Percentage of completion method
d. Completed contract method - ✔✔c. Percentage of completion method
Leasehold income is recognized over the lease term in
a. Outright method
b. Spread-out method
c. Cash basis
d. Percentage of completion method - ✔✔b. Spread-out method
%
Statement 1: The excess of mortgage assumed by the buyer over the basis of the
properties sold is the amount of the gain on the sale
Statement 2: Any collection from an installment contract where the mortgage exceeds
the tax basis of the properties received constitutes collection of income
Which statement is true?
a. Statement 1 only
b. Statement 2 only
c. Both statements are true.
d. Neither statement is true. - ✔✔b. Statement 2 only
Which is correct regarding the crop year method?
a. Crop year method is an accounting period.
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