ACCT 323 ACCT323 Quiz II Answers (UMUC)

ACCT 323 ACCT323 Quiz II Answers (UMUC)


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ACCT323 Quiz II (UMUC)

  1. The income tax base for an individual tax return is
  2. Which of the following statements regarding exclusions and/or deferrals is false
  3. Which of the following statements regarding tax deductions is false
  4. Michael‘s gross tax liability is $7,000. Michael had $2,000 of available credits and he had $4,000 of taxes withheld by his employer. What is Michael’s taxes due (or taxes refunded) with his tax return
  5. All of the following are tests for determining qualifying child status except the
  6. Which of the following is not necessary condition for income to be included in gross income
  7. Michelle is a cash-basis calendar-year taxpayer. During the last week of December she received a letter containing a $5,000 check for services. Which of the following is a true statement
  8. Identify the rule that determines whether a taxpayer must include in income a refund of an amount deducted in a previous year:
  9. Dave is a plumber who uses the cash method of accounting. This year Dave requested that his client make their checks payable to his son, Steve. This year Steve received checks in the amount of $62,000 for Dave’s plumbing services. Which of the following is a true statement
  10. Which taxpayer would not be considered a material participant of an activity
  11. Which of the following statements regarding traditional IRAs is true
  12. Which of the following is a true statement?
  13. The medical expense deduction is designed to provide relief for doctors and medical practitioners
  14. Deductible medical expenses include payments to medical care providers such as doctors, dentists, and nurses and medical care facilities such as hospitals.
  15. Taxpayers are allowed to deduct mortgage interest on up to $1,000,000 of acquisition debt for their qualified residence and on up to $500,000 of home-equity debt
  16. Taxpayers travelling for the primary purpose of receiving essential and deductible medical care may deduct the cost of the travel
  17. The deduction for medical expenses is limited to the amount of unreimbursed qualifying medical expenses paid during the year reduced by 5% of the taxpayer’s AGI
  18. The itemized deduction for taxes includes all types of  state, local and foreign taxes
  19. To qualify as a charitable deduction the donation must be made by cash or by check
  20. In general, taxpayers are allowed to deduct the fair market value of  capital gain property on the date of the donation to a qualified charitable organization


Short Problem 1: (Compute Tax Liability)

Michael Jones is single and provides you with the following information:


Salary                                                                        $225,000

Interest Income received from savings account            $2,250

Dividend Income                                                       $1,200



Alimony payment to ex-wife                                      $15,000

Mortgage Interest paid on residence                            $10,500

Real Property taxes paid on residence             $6,450

Charitable contribution                                              $6,000

Medical Expenses                                                      $9,000

Loss from sale of stock (Long-term)                            $10,000

Casualty loss                                                              $9,150

Miscellaneous Itemized Deductions                            1,800

Short Problem 2 (Taxable Income and NOL)

Jack and Janet are married and file a joint return. Janet owns a dental clinic while Jack works as an auditor with a local CPA firm. During 2014, they report the following items:

Jack’s Salary                                                               $30,000

Interest income from savings account                         $5,000

Home mortgage interest                                              $7,100

Itemized deductions for state and local taxes                $3,400


Janet medical clinic business:

Business income                                                        $150,000

Supplies expense                                                       $55,000

Rent                                                                          $45,000

Salary and payroll expense                                         $88,000

Advertising expense                                                   $9,000

Depreciation                                                              $18,000



  1. a.          What is Jack and Janet’s taxable income or loss for the year?

What are Jack and Janet’s Net Operating Loss (NOL) for the year

Short Problem 3 (Compute Taxable Income)

Elizabeth and James are married with two sons who are 10 and 14 years old. The couple provides you with the following tax return information:


Salary for 2014                                                          $150,000

Interest income from savings account                         $5,000

Tax exempt interest                                                   $10,000

Capital loss from sale of stock                        $7,000

Home mortgage interest paid                                     $5,000

State income taxes                                                     $6,000

Charitable contributions                                             $8,000

Medical expenses                                                      $25,000



 Compute Elizabeth and James taxable income only.

Short Problem 4 (Miscellaneous Employee Expenses)


Lionel Washington incurs the following miscellaneous expenses

Amount paid to a CPA for tax return preparation                                           $750

Amount paid for Airline ticket on business activities                                      $500

Taxi fare from airport to business meeting                                                      $100

Meals expenses from home on business                                                         $250

Personal expense on movies,   laundry and sightseeing                                  $600              

Employment-related expenses                                                           $550

Business meal with customers which business is discussed                            $800

Assume Lionel AGI is $65,000 and that Lionel received a total of $1,200 as reimbursement for all miscellaneous employee expenses.  What is the total miscellaneous itemized deduction?

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