ACCOUNTING 405 FINAL EXAM 2026
QUESTIONS WITH ANSWERS GRADED A+
COMPLETE SOLUTIONS
●● Partnership.
Answer: entity reports income on tax forms separate tax (information)
forms, but the profit or loss flows through to owner's individual income
tax returns
●● C Corporation.
Answer: income is taxed at the entity level rather than flowing through
to the owners
●● Gross income for a business may be calculated as sales less returns
and allowances.
Answer: Which of the following choices is incorrect when defining the
gross income of a business
a. gross income for a business may be calculated as sales less returns and
allowances
b. gross income from a business includes gross profit for inventory sales
c. revenues from renting property id included inn gross profit for rental
business
d. gross income for a service business can be calculated as income from
services provided
,●● Necessary.
Answer: Which of the following terms does the internal revenue code
use to describe deductible business expense
a. relevant
b. necessary
c. crucial
d. important
●● Hobbies are not primarily profit motivated.
Answer: Which of the following describes the difference between
business activities and hobbies
a. hobbies do not generate revenue
b. business activities require a full time work schedule
c. business activities do not have net losses
d. hobbies are not primarily profit motivated
●● ordinary.
Answer: The term _____ is used to describe an expense that is normal or
appropriate for the business under the circumstances
●● When it is not extravagant.
Answer: When is a business expense deemed to be reasonable in amount
, a. When it is not illegal
b. When it is not extravagant
c. When it is pay to a person or entity that is not related to the taxpayer
●● The equipment should be capitalized and depreciated according to
the tax code.
Answer: Allison purchased equipment that cost $100,000 for use in her
business. She expects the equipment to be useful for the business for the
next 8 years. Which of the following choices correctly describes the tax
treatment of the cost of equipment?
a. The equipment should NOT be deducted until the year Allison sells or
disposes of it
b. The equipment should be capitalized and depreciated according to the
tax code
c. The equipment should be deducted in the year it is purchased
●● The course or courses qualify Evan for new trade or business.
Answer: Evan incurred education related expenditures related to this job.
Under which of the following circumstances will Evan not be allowed to
deduct these expenditures as a BUSINESS expense
a. the course or courses meet the requirements necessary to keep his job
b. the course for courses improve Evan's skills in his existing business
c. the course or courses qualify Evan for a new trade or business
QUESTIONS WITH ANSWERS GRADED A+
COMPLETE SOLUTIONS
●● Partnership.
Answer: entity reports income on tax forms separate tax (information)
forms, but the profit or loss flows through to owner's individual income
tax returns
●● C Corporation.
Answer: income is taxed at the entity level rather than flowing through
to the owners
●● Gross income for a business may be calculated as sales less returns
and allowances.
Answer: Which of the following choices is incorrect when defining the
gross income of a business
a. gross income for a business may be calculated as sales less returns and
allowances
b. gross income from a business includes gross profit for inventory sales
c. revenues from renting property id included inn gross profit for rental
business
d. gross income for a service business can be calculated as income from
services provided
,●● Necessary.
Answer: Which of the following terms does the internal revenue code
use to describe deductible business expense
a. relevant
b. necessary
c. crucial
d. important
●● Hobbies are not primarily profit motivated.
Answer: Which of the following describes the difference between
business activities and hobbies
a. hobbies do not generate revenue
b. business activities require a full time work schedule
c. business activities do not have net losses
d. hobbies are not primarily profit motivated
●● ordinary.
Answer: The term _____ is used to describe an expense that is normal or
appropriate for the business under the circumstances
●● When it is not extravagant.
Answer: When is a business expense deemed to be reasonable in amount
, a. When it is not illegal
b. When it is not extravagant
c. When it is pay to a person or entity that is not related to the taxpayer
●● The equipment should be capitalized and depreciated according to
the tax code.
Answer: Allison purchased equipment that cost $100,000 for use in her
business. She expects the equipment to be useful for the business for the
next 8 years. Which of the following choices correctly describes the tax
treatment of the cost of equipment?
a. The equipment should NOT be deducted until the year Allison sells or
disposes of it
b. The equipment should be capitalized and depreciated according to the
tax code
c. The equipment should be deducted in the year it is purchased
●● The course or courses qualify Evan for new trade or business.
Answer: Evan incurred education related expenditures related to this job.
Under which of the following circumstances will Evan not be allowed to
deduct these expenditures as a BUSINESS expense
a. the course or courses meet the requirements necessary to keep his job
b. the course for courses improve Evan's skills in his existing business
c. the course or courses qualify Evan for a new trade or business
