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					1. Which one of the following items is not considered gross income for tax purposes?
(Points: 2)
        gambling winnings
        illegal income
        face amount of life insurance received due to the death of the insured
        cash dividends


2. Frasier and Marcella, husband and wife, file separate returns. Frasier and Marcella live
in a community property state that considers separate property income to be separate.
Frasier's salary is $42,000 and Marcella's salary is $46,000. Marcella receives dividend
income of $4,000 from stock inherited from her parents. Frasier receives interest income
of $1,000 from bonds purchased with his salary after marriage. Frasier and Marcella
receive $3,200 dividend income from stock they purchased jointly. Marcella's income
would be (Points: 2)
        $50,000.
        $50,100.
        $51,100.
        $51,600.


3. Bill and Hillary, husband and wife, file separate returns. Bill and Hillary live in a
community property state that considers separate property income to be community
income. Bill's salary is $82,000 and Hillary's salary is $80,000. Hillary receives dividend
income of $7,000 from stock inherited from her parents. Bill receives interest income of
$5,000 from bonds purchased with his salary after marriage. Bill and Hillary receive
$10,000 dividend income from stock they purchased jointly. Bill's income would be
(Points: 2)
        $92,000.
        $93,000.
        $94,500.
        $97,000.


4. All of the following statements are true except (Points: 2)
        Under the cash method, prepaid income such as rent is usually taxed when
received rather than when earned.
        Municipal bond interest is taxable.
        Alimony received by the taxpayer is taxable.
        Income earned by selling goods on the Internet are taxable.


5. Examples of income which are constructively received include all of the following
except (Points: 2)
        interest credited to a savings account.
        a check received after banking hours.
        a paycheck received from employer, when employer does not have funds in the
bank to cover the check.
        dividends available on December 31; unclaimed dividends will be mailed out.


6. Ms. Marple's books and records for 2010 reflect the following information:
Salary earned this year $65,000
Interest on savings account (credited to her
account in 2010, withdrawn in 2011) 1,000
Interest on county bonds earned and collected in 2010 2,000

What is the amount Ms. Marple should include in her gross income in 2010? (Points: 2)
        $66,000
        $67,000
        $68,000
        $65,000


7. One of the requirements that must be met in order to defer recognition of income for
advance payments for goods is: (Points: 2)
        the taxpayer's method of accounting for the sale for tax purposes is the same as
the method used for financial reporting purposes.
        the goods are on the taxpayer's premises on the last day of the tax year.
        the goods are produced in the United States.
        the amount received is more than the taxpayer's cost of the goods.


8. Which of the following advance payments cannot qualify for income tax deferral?
(Points: 2)
        advance collection for services
        advance collection for merchandise
        advance collection of rent without associated services
        advance collection of rent with associated services


9. CT Computer Corporation, an accrual basis taxpayer, sells service contracts on the
computers it sells. At the beginning of January of this year, CT Corporation sold
contracts with service to begin immediately:
One for three months $200
One for 20 months costing 800
One for 36 months costing 1,000
The amount of income CT Corporation must report for this year is (Points: 2)
        $200.
        $1,000.
        $1,680.
        $2,000.


10. Alex is a calendar year sole proprietor. He began business on December 1, this year.
He uses the accrual method of accounting. Alex had the following collections in
December.
Collected $7,000 in December, from clients who paid cash for services to be performed
next year.
Collected $5,000 in December, for services performed during December; deposited in an
operating
account on December 31, this year.
Collected $12,000 in December; on accounts receivable for services performed in
December;
deposited in operating account on January 2, next year.
What is the amount Alex must include in his income for December? (Points: 2)
        $7,000
        $12,000
        $17,000
        $24,000

				
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