Accounting Mid-term Exam 29 Problems 2015

1- Dennis, the owner of Dennis Company, incurs the following expenses while away from home on a three-week business trip during the current tax year:Air fare from Chicago to Boston = $700; Hotel charges = $1,800; Meal charges = $780; Dry cleaning and laundry = $100; Local transportation = $35; Business entertainment = $150; Business gift to Boston manager = $45; In addition to the above expenses, Dennis incurred the following expenses for a weekend sightseeing trip to Washington D.D: Transportation to Washington D.C. = $200; Hotel charges = $125; Meal charges = $95. Calculate the amount Dennis may deduct as travel expenses for the trip.2- A taxpayer received the following distributions from a Federal Mutual Fund for the calendar year: Capital gain distributions = $170; Ordinary dividends = $250; Nontaxable distribution = $80; His spouse received $175 in interest on a savings account at NV National Bank and $1,475 in interest on the US Treasury Bills. The taxpayer and his spouse filed a joint tax return for the current year. What is the amount of interest income that must be reported in their joint tax return?3- Sally and Martha are tax accountants sharing an office in San Diego. Every year they attend the special Tax Planning Forum in Las Vegas put on by nationally renowned experts. The Forum lasts for two days. One evening Sally and Martha attend a show and another evening they had a $10 loss gambling on the nickel slot machines. Their expenses are as follows: Airfare = $ 200; Hotel = $300; Meals = $150; Seminar registration = $1,000; Tickets to show = $100; Gambling loss = $10. Calculate the firm’s educational expense deduction for the current year.4- Dennis is a self-employed hair stylist who operates a salon in his home. The taxes and interest allocated to the business amount to $5,000; maintenance and utilities allocated to the business total $2,100, and depreciation allocated to the business use of the home equals $3,000 for the current tax year. If Dennis’ gross billings after deducting supplies for his business are $5,800 for the current tax year, calculate his allowable deductions for the home office.5- Chris opens a chiropractic office in Texas on January 1, current tax year. On July 1, current tax year, Chris purchases a chiropractic reference library from a retiring chiropractor for $6,000. The library has an estimated useful life of three years. Annual depreciation on the library is $2,000. On January 1, current tax year, Chris purchases an annual subscription to a chiropractic journal for $200 and a one-year medical reference service for $500. Calculate Chris’s deduction for the above items for the current tax year.6- A taxpayer died on July 1, current tax year, and left his wife a $50,000 life insurance policy which she elects to receive $5,000 per year plus interest for 10 years. In the current tax year, the wife received $6,200. How much should the wife include in her gross income.7- Stacy donates a hotel to a university for use as a conference center. The building cost $1,500,000 three months ago and has a fair market value of $1,900,000 on the date the contribution is made. If Stacy had sold the building the $400,000 difference between the sales price and cost would have been a short-term capital gain. What is the amount of Stacy’s deduction for this contribution, considering any limitation based on AGI.8- Cassie finished her undergraduate degree using money from a student loan. She earned $36,000 her first year and paid $2,600 in interest. How much can she take as a deduction for AGI student loan interest?9- Tim makes a $5,000 cash contribution to a public university. In that month he also donates $20,000 to an organization subject to the 30 percent limitation. Tim has AGI of $35,000. What is the amount of Tim’s charitable contribution deduction?10- Gene receives a $2,000 distribution from his educational savings account. He uses $1,600 to pay for qualified higher education expenses. On the date of the distribution, Gene’s account balance is $5,000, $2,500 of which is her contributions. What is Gene’s taxable income (after any exclusion) from the distribution?11- Linda installed a special pool for the hydro-therapeutic treatment of severe arthritis as prescribed by her doctor. The cost of installing the pool was $20,000, and her insurance company paid $5,000 towards its cost. The pool increased the value of Linda’s house by $7,000 and it has a useful life of 10 years. How much of a deduction is Linda entitled to in the year of installation of the pool?12- Airfare to and from San Diego = $575; Hotel charges while on business = $340; Meals while on business = $210; Car rental while on business = $120; Hotel charges while on vacation = $460; Meals while on vacation = $290; Car rental while on vacation = $180. Calculate the taxpayer’s travel expense deduction for the trip, assuming the trip was made in the current year.13- Cindy operates a computerized engineering drawing business from her home. She maintains a home office and properly allocates the following expenses to her office:Depreciation = $1,500; Utilities = $500; Taxes = $325; Interest (100% deductible) = $500. Assume that Cindy earns income of $2,400 from her business for the year before deducting home office expenses. She has no other expenses associated with the business. Calculate Cindy’s deduction for home office expenses.14- Joe paid the following amount for his son to attend BYU in the current year: Tuition = $6,000; Room and board = $5,000; Books = $500; A car to use at school = $2,000; Student football tickets = $200; Spending money = $4,000. How much of these items is qualified higher education expense for purposes of his Qualified Tuition Program.15- Jerry contributed the following:His synagogue (by check) = $680; The Republican Party (by check) = $180; The American Red Cross (by check) = $150; His lodge for a holiday party = $100. In addition he donated used furniture to Salvation Army costing $2,000 with a fair market value of $400. Assuming Jerry has AGI of $45,000, has the necessary written acknowledgments, and itemizes deductions, what is the total amount of charitable contribution deductions?16- TP paid the following amounts of interest during the current tax year: Interest on Las Vegas residence (loan balance $50,000) = $2,025; Interest on Hawaii residence (loan balance $50,000) = $3,050; Automobile loan interest = $440; VISA and MC interest = $180. Calculate the amount of TP’s itemized deduction for interest after limitations for the current tax year.17- On January 1, current tax year, taxpayer discovers his diamond ring has been stolen. The ring had a fair market value and adjusted basis of $8,000. Assuming taxpayer had no insurance coverage on the ring and his AGI for the current tax year is $52,000, what is the amount of theft loss deduction18- Lynda’s employer withheld $1,800 in state income taxes from her wages. Lynda obtained a refund of $200 in this year for overpayment of state income taxes for last year. State income taxes were an itemized deduction on her last year’s return. Her liability for this year’s state income tax is $1,400. Indicate the amount of Lynda’s deduction for state income taxes on her federal tax return assuming she elects to deduct state income taxes for the current year.19- Richie has income of $55,000 from Sweden, which imposes a 30% income tax, and $45,000 of income from Italy which imposes a 40% income tax. Richie has taxable income from US sources of $200,000 and US tax liability before credits of $90,000. What is the amount of the foreign tax credit?20- Willie has an apartment full of antique furniture. A fire in the apartment destroyed a large part of his furnishings. The destroyed furnishings have a fair market value of $40,000 and Willie’s basis in the furnishings is $33,750. He recovered $13,000 from his insurance company. His AGI is $43,000. What will be the bottom line deduction on Form 468421- TP is a practicing CPA who decides to raise bonsai as a business. TP engages in the activity and has the following revenue and expenses: Sales = $5,000; Investment interest expense (100% deductible) = $12,000; Depreciation on greenhouse = $10,000; Personal property taxes = $1,000; Fertilizer, soil, pots = $1,500. If the activity is deemed to be a regular business, what is the amount of TP’s deduction for the loss from the activity.22- A taxpayer finished her undergraduate degree using money from a student loan. She earned $36,000 her first year and $2,600 in interest. She can take a deduction for student loan interest in the amount of ______.23- During the current tax year, a taxpayer makes a $5,000 cash contribution to a public university. During the same current tax year, he also donated $20,000 to an organization subject to the 30 percent limitation. The taxpayer has AGI for the current tax year of $35,000. What is the amount of this taxpayer’s charitable contribution deduction?24- A taxpayer receives $1,500 distribution from his educational savings accont. He uses $1,200 to pay for qualified higher education expenses. On the date of the distribution, his account balance is $5,000, $3,000 of which is his contributions. What is his tax-free return of capital from the distribution?25- An unmarried individual paid $6,500 in qualified adoption expenses to a an adoption agency for the final adoption of an eligible child who is not a child with special needs. In the same year, the individual’s employer, under a qualified adoption assistance program, pays an additional $4,000 for other qualified adoption expenses to an attorney on behalf of this TP for the adoption of the child. Assuming TP is not subject to the phase-out, how much of the $4,000 payment made by the employer can be excluded26- If a taxpayer does not have enough tax liability to use all the available adoption credit, the unused portion may be carried forward for how many years?27- Husband and wife are married and live in Texas. Wife earns a salary of $45,000 and husband has $25,000 of rental income from his separate property. If husband and wife file separate tax returns, what amount of income must husband report?28- A taxpayer had $3,100 in state income taxes withheld from her paychecks during the current tax year. In April of the same current tax year, she paid $300 due for her prior year state tax return. Her total tax liability on her state tax return for the current year is $2,850. How much should she deduct as an itemized deduction for state income taxes on her current federal income tax return?29- A married husband and wife who file a joint tax return with AGI of $25,000 incurred the following documented expenses during the current tax year: Their insurance company reimbursed them $1,000. Hospitalization insurance premiums = $1,050; Psychiatric care = $300; Hospital bills = $2,200; doctor’s bills = $850; Dentist bills = $175; Prescription Drugs = $340; Over-the-counter cough medication & bandages = $500; Meals of spouse while visiting the injured wife = $250. Calculate their medical expense deduction after the limitation as shown on Line 4 of Schedule A.

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