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ACCT 324 Week 8 Final Exam New

ACCT 324 Week 8 Final Exam New

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Author: Christine Farr
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1. (TCO 2, 3) Evelyn sold her personal residence to Drew on March 1 for $300,000. Before the sale, Evelyn paid the real estate taxes of $3,000 for the calendar year. For income tax purposes, the real estate tax deduction is apportioned as follows: $750 to Evelyn and $2,250 to Drew. Drew's basis in the residence is:
2. (TCO 3) During 2012, Doris paid the following interest charges:

Home mortgage
$6,000
On loan to purchase a new car
$1,500
On student loan
$800

If Doris itemizes her deductions for 2012, the amount deductible for interest expense as an itemized deduction is:
3. (TCO 3) Cornelia incurred the following expenses for her dependent son during the current year:

Payment of principal on son's mortgage loan
$5,500
Interest on son's mortgage loan
$4,500
Payment of son's medical expenses
$2,500
Payment of son's property taxes
$2,750

How much may Cornelia consider in computing her itemized deductions?
4. (TCOs 3, 4, 5, 6 & 7) Lilly made the following gifts during the year: To Lola, a key client ($10 of the amount listed was for gift wrapping) $40 To Jonelle, Lilly's secretary, on Jonelle's birthday $40 To Gerard, Lilly's boss, at Christmas $80 Presuming proper substantiation, Lilly's deduction is: (Points : 5)
5. (TCOs 3, 4, 5, & 7) Grape Corporation purchased a machine in December of the current year. This was the only asset purchased during the current year. The machine was placed in service in February of the following year. No assets were purchased in the following year. Grape Corporation’s cost recovery would begin:
6. (TCOs 3, 4, 5, & 7) Under the terms of a divorce agreement, Troy is to pay his wife Brook $1,200 per month. The payments are to be reduced to $800 per month when their 12-year-old child reaches age 18. During the current year, Troy paid $14,400 under the agreement. Assuming all of the other conditions for alimony are satisfied, Troy can deduct from gross income (and Brook must include in gross income) as alimony: (Points : 5)
7. (TCOs 3, 4, 5 and 7) Denice's regular income tax liability is $200,000, and her tentative AMT is $270,000. Denice's AMT is: (Points : 5)
8. (TCO 7) Kobe, age 19, is a full-time student at State College and a candidate for a bachelor's degree. During 2012, he received the following payments:
Wages
$3,000
State scholarship for ten months (tuition and books)
$5,000
Loan from college financial aid office
$2,750
Cash support from parents
$2,500
Cash dividends
$1,500
Cash prize awarded in contest
$1,250
$16,000

What is Kobe's adjusted gross income for 2012? (Points: 5)
9. (TCOs 7, 8 and 9) Orlando and Katelyn were divorced. Their only marital property was a personal residence with a value of $250,000 and cost of $100,000. Under the terms of the divorce agreement, Katelyn would receive the house and Katelyn would pay Orlando $50,000 each year for five years. If Orlando should die, the remaining payments would be made to his estate. Orlando and Katelyn lived apart when the payments were made to Orlando. The divorce agreement did not contain the wordalimony. (Points : 5)
10. (TCOs 2, 8, & 9) Shaquille operates a drug-running operation and incurred the following expenses:
Salaries

$200,000

Illegal kickbacks

$32,000

Bribes to border guards

$24,000

Cost of goods sold

$300,000

Rent

$12,000

Interest

$18,000





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