TAX FINAL EXAM REVIEW QUESTIONS
AND VERIFIED ANSWERS
\.What are the three Accounting periods? - ANSWERS✔--Calendar yr.
-Fiscal year (Ending last day of the month, other than December)
-52/53 week
\.What is the method for recognizing income under the accrual method? -
ANSWERS✔-All events have occurred and in reasonable amount.
\.When is the all events test met, assuming it can be reasonably determined? -
ANSWERS✔-On the earliest of:
-Payment for task due from customer
-Business receives payment
-When completing task required to earn income
\.Businesses must recognize prepayment income from rent and interest
immediately upon receipt. T/F - ANSWERS✔-True
\.What accounting method must you use for inventory? - ANSWERS✔-Accrual
, \.For Accrual deductions, the business must meet what two parts? - ANSWERS✔--
All events test
-Economic performance
\.For goods expecting to be received, can deduct as long as goods are received
_____ after the payment. - ANSWERS✔-3.5 months
\.For deducting rental/leasing expenses, deduct _____. - ANSWERS✔--Ratably
\.What is the recurring item exception? - ANSWERS✔--Liability expected to persist
in future years, all events test must be satisfied at year end, and actual economic
performance must occur within a reasonable time or within 8.5 months.
\.What is the 12 month rule? - ANSWERS✔-Immediately expenses that create
benefits for a brief period in time
-Contract not longer than a year
-Contract period does not extend beyond taxable year
\.What is the corporate tax formula? - ANSWERS✔-Realized Income
-(Deferrals/Exclusions & Cost of Goods Sold)
=Gross Income
-(Deductions)
=Taxable Income before special deductions
-(Special Deductions)
AND VERIFIED ANSWERS
\.What are the three Accounting periods? - ANSWERS✔--Calendar yr.
-Fiscal year (Ending last day of the month, other than December)
-52/53 week
\.What is the method for recognizing income under the accrual method? -
ANSWERS✔-All events have occurred and in reasonable amount.
\.When is the all events test met, assuming it can be reasonably determined? -
ANSWERS✔-On the earliest of:
-Payment for task due from customer
-Business receives payment
-When completing task required to earn income
\.Businesses must recognize prepayment income from rent and interest
immediately upon receipt. T/F - ANSWERS✔-True
\.What accounting method must you use for inventory? - ANSWERS✔-Accrual
, \.For Accrual deductions, the business must meet what two parts? - ANSWERS✔--
All events test
-Economic performance
\.For goods expecting to be received, can deduct as long as goods are received
_____ after the payment. - ANSWERS✔-3.5 months
\.For deducting rental/leasing expenses, deduct _____. - ANSWERS✔--Ratably
\.What is the recurring item exception? - ANSWERS✔--Liability expected to persist
in future years, all events test must be satisfied at year end, and actual economic
performance must occur within a reasonable time or within 8.5 months.
\.What is the 12 month rule? - ANSWERS✔-Immediately expenses that create
benefits for a brief period in time
-Contract not longer than a year
-Contract period does not extend beyond taxable year
\.What is the corporate tax formula? - ANSWERS✔-Realized Income
-(Deferrals/Exclusions & Cost of Goods Sold)
=Gross Income
-(Deductions)
=Taxable Income before special deductions
-(Special Deductions)
