15 May QuestionQuiz 31.Kip started a wholesale store this year selling bulk peanut butter.
Question
Quiz 3
1.
Kip started a wholesale store this year selling bulk peanut butter. In January of this year Kip purchased an initial five tubs of peanut butter for a total cost of $5,000. In July Kip purchased three tubs for a total cost of $6,000. Finally, in November Kip bought two tubs for a total cost of $1,000. Kip sold six tubs by year end. What is Kip’s ending inventory under the FIFO cost-flow method?
| $12,000 | |
| $6,000 | |
| $5,000 | |
| $2,500 | |
| $1,000 |
2.
Paris operates a talent agency as a sole proprietorship, and this year she incurred the following expenses in operating her talent agency. What is the total deductible amount of these expenditures?
$1,000 dinner with a film producer where no business was discussed
$500 lunch with sister Nicky where no business was discussed
$700 business dinner with a client but Paris forgot to keep any records (oops!)
$900 tickets to the opera with a client following a business meeting
| $450 | |
| $900 | |
| $1,100 | |
| $1,200 | |
| $800 |
3.
Which of the following is a true statement about travel that has both business and personal aspects?
| Transportation costs are always fully deductible. | |
| Meals are not deductible for this type of travel. | |
| Only half of the cost of meals and transportation is deductible. | |
| The cost of lodging, and incidental expenditures is limited to those incurred during the business portion of the travel. | |
| None of these. |
4.
Individual proprietors report their business income and deductions on:
| Form 1065 | |
| Form 1120S | |
| Schedule C | |
| Schedule A | |
| Form 1041 |
5.
Which of the following expenditures is most likely to be deductible for a construction business?
| A fine for a zoning violation. | |
| A tax underpayment penalty. | |
| An “under the table” payment to a government representative to obtain a better price for raw materials. | |
| A payment to a foreign official to expedite an application for a business permit. | |
| An arm’s length payment to a related party for emergency repairs of a sewage line. |
6.
Don operates a taxi business, and this year one of his taxis was damaged in a traffic accident. The taxi was originally purchased for $32,000 and the adjusted basis was $2,000 at the time of the accident. The taxi was repaired at a cost of $2,500 and insurance reimbursed Don $700 of this cost. What is the amount of Don’s casualty loss deduction?
| $1,300. | |
| $2,500. | |
| $1,800. | |
| $2,000. | |
| Don is not eligible for a casualty loss deduction. |
7.
Which of the following is a true statement about a request for a change in accounting method?
| Some requests are automatically granted. | |
| Most requests require the permission of the Commissioner. | |
| Many requests require payment of a fee and a good business purpose for the change. | |
| Form 3115 is required to be filed with a request for change in accounting method. | |
| All of these are true. |
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