Question 1

Duck Company has valued its inventories at FIFO cost for the past 10 years.The company would like to change to the LIFO method,effective in 2015.

Accepted Answer

A)  The election to change can be made with the 2015 tax return and the beginning inventory for 2015 will be the same as the FIFO inventory at the end of 2014 and no § 481 adjustment is required.
B)  The beginning inventory value for 2015 must be computed as though the company had been using LIFO in all prior years and a § 481 adjustment is required.
C)  The taxpayer must apply in 2014 for permission to change methods effective in 2015.
D)  Duck must amend all prior years' tax returns to compute income by the LIFO method.
E)  None of these.F) C) and D)
G) A) and B)

Question 2

A retailer must actually receive a claim for refund from the customer before a deduction can be taken for the refund.

Accepted Answer

A) True 
 B)False

Question 3

In 2014,Father sold land to Son for $50,000 cash and an installment note for $150,000 due in 2018.Father's basis was $100,000.In 2015,after paying $8,000 interest but nothing on the principal,Son sold the land for $300,000 cash.What gain,if any,must Father recognize in 2015?

Accepted Answer

A)  $0
B)  $75,000
C)  $100,000
D)  $200,000
E)  None of theseF) B) and C)
G) C) and E)

Question 4

Snow Corporation began business on May 1,2014,and elected to use the calendar year for tax purposes.Brown Corporation,a calendar year corporation,sold all of its assets and liquidated as of April 30,2014.Neither Snow Corporation nor Brown Corporation must annualize their income for their 2014 returns.

Accepted Answer

A) True 
 B)False

Question 5

The installment method can be used for which of the following sales with payments being made in the year following the year of sale?

Accepted Answer

A)  A department store's credit card sales.
B)  An individual's sale of common stock in a family owned business.
C)  An individual's sale of General Electric common.
D)  Depreciable equipment sold for less than its original cost.
E)  All of these.F) A) and C)
G) D) and E)

Question 6

Purple Corporation,a personal service corporation (PSC) ,adopted a fiscal year ending September 30th.The sole shareholder of the corporation is a calendar year taxpayer.During the fiscal year ending September 30,2014,the shareholder-employee received $120,000 salary.The corporation paid the shareholder-employee a salary of $15,000 during the period beginning October 1,2014 through December 31,2014.

Accepted Answer

A)  The corporation salary expense for the fiscal year ending September 30,2015 is limited to $120,000.
B)  The corporation salary expense for the fiscal year ending September 30,2015 is limited to $135,000.
C)  The corporation salary expense for the fiscal year ending September 30,2015 is limited to $60,000.
D)  The corporation must switch to a calendar year.
E)  None of these.F) A) and D)
G) C) and E)

Question 7

The taxpayer had incorrectly been using the cash method of accounting.For 2014,the company voluntarily changed to the accrual method.The adjustment due to the change in method as calculated at the beginning of 2014 was $120,000 (positive) .The adjustment as calculated as of the end of 2014 was $80,000 (positive) .As a result of the change in method,the company must:

Accepted Answer

A)  Increase its income for 2014 by $120,000.
B)  Increase its income for 2014 by $80,000.
C)  Increase its income for 2014 by $30,000.
D)  Increase its income for 2014 by $40,000.
E)  None of these.F) C) and D)
G) B) and D)

Question 8

The Seagull Partnership has three equal partners.Partner A's tax year ends June 30th,and Partners B and C use a calendar year.If the partnership uses the calendar year to report its income,Partner A is permitted to defer partnership income earned from July through December 2014 until he files his tax return for his year ending June 30,2015.

Accepted Answer

A) True 
 B)False

Exam 18: Accounting Periods and Methods

Correct Answer
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Correct Answer
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Duck Company has valued its inventories at FIFO cost for the past 10 years.The company would like to change to the LIFO method,effective in 2015.

Correct Answer
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Correct Answer
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In 2014,Father sold land to Son for $50,000 cash and an installment note for $150,000 due in 2018.Father's basis was $100,000.In 2015,after paying $8,000 interest but nothing on the principal,Son sold the land for $300,000 cash.What gain,if any,must Father recognize in 2015?

Correct Answer
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The installment method can be used for which of the following sales with payments being made in the year following the year of sale?

Correct Answer
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A retailer must actually receive a claim for refund from the customer before a deduction can be taken for the refund.

Correct Answer
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Correct Answer
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Exam 18: Accounting Periods and Methods

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Duck Company has valued its inventories at FIFO cost for the past 10 years.The company would like to change to the LIFO method,effective in 2015.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

In 2014,Father sold land to Son for $50,000 cash and an installment note for $150,000 due in 2018.Father's basis was $100,000.In 2015,after paying $8,000 interest but nothing on the principal,Son sold the land for $300,000 cash.What gain,if any,must Father recognize in 2015?

Correct AnswerverifiedShow Answer

The installment method can be used for which of the following sales with payments being made in the year following the year of sale?

Correct AnswerverifiedShow Answer

A retailer must actually receive a claim for refund from the customer before a deduction can be taken for the refund.

Correct AnswerverifiedShow Answer

Correct AnswerverifiedShow Answer

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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