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1) Ricky has rented a house from Sarah since last year

Accounting

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1) Ricky has rented a house from Sarah since last year. The rent is usually $800 per month, but Sarah reduced the monthly rent down to $600 for all 12 months this year in exchange for Ricky constructing an addition to the house. The addition has a fair market value of $3,500. How much total rental income must Sarah report this year?

A.  $7,200

B.  $9,600

C.  $10,700

D.  $14,200

 

2) Alex is a calendar-year sole proprietor. He began business on December 1 of this year. He uses the accrual method of accounting. Alex had the following collections in the same month: He collected $7,000 in December from clients who paid cash for services to be performed next year. He collected $5,000 in December for services performed during December, which he deposited in an operating account on December 31 of this year. He collected $9,000 in December on accounts receivable for services performed in December, which he deposited in an operating account on January 2 of next year. What is the amount Alex must include in his income for December?

A.  $7,000

B.  $12,000

C.  $14,000

D.  $21,000

 

3) Bianca is beneficiary of an $80,000 insurance policy on her father's life. Upon his death, she may elect to receive the proceeds in 5 yearly installments of $17,500 or may take the $80,000 lump sum. She elects to take the lump sum payment. What are the tax consequences in year one?

A.  All $17,500 each year is taxable.

B.  $7,500 interest is taxable in the first year.

C.  There is no taxable income.

D.  $1,500 of the $17,500 payment is taxable each year.

 

4) Nonrefundable tax credits

A.  only offset a taxpayer's tax liability.

B.  may only be used if the taxpayer is receiving a refund.

C.  have expired but may be reinstated with new tax legislation.

D.  allow the excess over the taxpayer's tax liability to be paid to the taxpayer.

 

5) Paul makes the following property transfers in the current year: $22,000 cash to his wife, $34,000 cash to a qualified charity, $120,000 house to his son, and $3,000 computer to an unrelated friend. The total of Paul's taxable gifts, assuming he does not elect gift splitting with his spouse, subject to the unified transfer tax, is

A.  $107,000.

B.  $123,000.

C.  $145,000.

D.  $179,000.