KAPLAN AC256 UNIT 4 EXAM LATEST 2016 JANUARY

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Grading Summary


These are the automatically computed results of your exam. Grades
for essay questions, and comments from your instructor, are in the
“Details” section below.


Date and Time Started: 2/7/2016
4:35:37 AM


Time Spent: 32
min , 20 secs


Points Received: 56
/ 80 (70%)


Question Type: # Of
Questions: # Correct:


Multiple Choice 20 14


Grade Details – All Questions


Question 1. Question
:


Which of the following items will result in an inclusion in
gross income?




Receipt of a $10,000 check from the bank. The
check is for a student loan.


Receiving a $10,000 award from a university
for high grades and high SAT scores. The award is used to pay tuition.


Preparing a mechanic’s tax return in exchange
for the mechanic replacing the muffler on your car.


None of the above will be included in gross
income.




Points Received: 4 of 4


Comments:



Question 2. Question
:


Britney is beneficiary of a $150,000 insurance policy on her
father’s life. Upon his death, she may elect to receive the proceeds in five
yearly installments of $32,000 or may take the $150,000 lump sum. She elects to
take the lump sum payment. What are the tax consequences in year one?




All $32,000 each year is taxable.


$10,000 interest is taxable in the first year.


There is no taxable income.


The lump sum payment is taxable.




Points Received: 4 of 4


Comments:



Question 3. Question
:


Over the years, Rianna paid $65,000 in premiums on a life
insurance policy with a face value of $100,000. Upon reaching 65, while still
in good health, Rianna surrendered the policy and collected $95,000. In the
year of collection, Rianna will report




no income.


$30,000 of taxable income.


$5,000 of tax loss.


$95,000 of taxable income.




Points Received: 4 of 4


Comments:



Question 4. Question
:


Natasha is a single taxpayer with a 28% marginal tax rate.
She received distributions of earnings this year as follows:




CE Corp., a C corporation $1,000


SE Corp., an S Corporation 2,000


Paris Corp., a foreign corporation 3,000





How much of the $6,000 distribution will be taxed at the 15%
tax rate?




$0


$1,000


$3,000


$6,000




Points Received: 0 of 4


Comments:



Question 5. Question
:


Norah’s Music Lessons Inc. is a calendar-year taxpayer using
the accrual method of accounting. On October 1 of this year, the corporation
received $1,200 for a 1-year contract beginning on that date to provide 10
lessons. The company provided six lessons this year under the contract. How
much should corporation include in income this year with respect to this
contract?




$480


$360


$720


$1,200




Points Received: 4 of 4


Comments:



Question 6. Question
:


Frasier and Marcella, husband and wife, file separate
returns. Frasier and Marcella live in a community property state that considers
separate property income to be separate. Frasier’s salary is $42,000 and
Marcella’s salary is $46,000. Marcella receives dividend income of $4,000 from
stock inherited from her parents. Frasier receives interest income of $1,000
from bonds purchased with his salary after marriage. Frasier and Marcella
receive $3,200 dividend income from stock they purchased jointly. Marcella’s
income would be




$50,000


$50,100


$51,100


$51,600




Points Received: 4 of 4


Comments:



Question 7. Question
:


Derrick was in an automobile accident while he was going to
work. The doctor advised him to stay home for eight months due to his physical
injuries. The resulting lawsuit was settled and Derrick received the following
amounts:



Compensatory damages for physical injury $80,000


Punitive damages 95,000




How much of the settlement must Derrick include in ordinary
income on his tax return?




$0


$80,000


$95,000


$175,000




Points Received: 4 of 4


Comments:



Question 8. Question
:


Brad suffers from congestive heart failure and has been
admitted to a nursing home where he is expected to spend the remainder of his
life. His doctor has certified him as chronically ill. Brad receives $320 per
day from his life insurance policy for 100 days ($32,000) as accelerated death
benefits. Brad’s nursing home care costs $300 per day ($30,000 for the 100 days
of care). Brad will be allowed to exclude




$0.


$30,000.


$32,000.


$2,000.




Points Received: 4 of 4


Comments:



Question 9. Question
:


During the year, Cathy received the following:


• Dividends of $4,000 from Lindsay Corporation. Cathy’s
father owned the stock and directed the corporation to send the dividends to
Cathy.


• A car worth $30,000 for being the 1,000th customer at a
car dealership.


• $5,500 cash gift from her uncle.


• $10,000 inheritance from her grandmother.



What amount must Cathy include in gross income?




$30,000


$34,000


$39,500


$49,500




Points Received: 0 of 4


Comments:



Question 10. Question
:


Norah, who gives music lessons, is a calendar-year taxpayer
using the cash basis method of accounting. On October 1 of this year, she
received $1,200 for a 1-year contract beginning on that date to provide 10
lessons. She gave six lessons this year. How much should Norah include in
income this year?




$480


$360


$720


$1,200




Points Received: 4 of 4


Comments:



Question 11. Question
:


Which of the following criteria is not required under the
tax concept of income?



There must be economic benefit.


Income must be realized.


Income must be recognized.


Cash must be received.




Points Received: 0 of 4


Comments:



Question 12. Question
:


Which of the following is not excluded from income? (Assume
that any amounts received by the taxpayer were kept.)



Public assistance payments


Fair market value of prize won on a game show


Gifts and inheritances


Life insurance proceeds paid by reason of
death




Points Received: 0 of 4


Comments:



Question 13. Question
:


Amy’s employer provides her with several fringe benefits.
Which of the following are included in her taxable income?




Christmas bonus check


Group term life insurance premium paid by
employer for $40,000 coverage for Amy


Employee discount


Employer’s contribution to retirement plans on
Amy’s behalf




Points Received: 4 of 4


Comments:



Question 14. Question
:


Which of the following statements is false?



Under the cash method, prepaid income such as
rent is usually taxed when received rather than when earned.


Municipal bond interest is taxable.


Alimony received by the taxpayer is taxable.


Income earned by selling goods on the Internet
is taxable.




Points Received: 4 of 4


Comments:



Question 15. Question
:


Richard is a key employee of Winn Corporation. The
corporation provides Richard with $120,000 of group-term life insurance
coverage. Only company executives receive life insurance coverage. The premium
attributable to the coverage is $1,600. The uniform 1-month group-term premium
is one dollar per $1,000 of coverage. How much must Richard include in income
due to the policy?




INCORRECT $0


$840


$1,440


$1,600




Points Received: 0 of 4


Comments:



Question 16. Question
:


Rebecca is the beneficiary of a $500,000 insurance policy on
her husband’s life. She elects to receive $52,000 per year for 10 years rather
than receive the entire amount in a lump sum. Of the amount received each year



$2,000 is taxable income.


$50,000 is taxable income.


$52,000 is taxable income.


$5,000 per year is tax free as a death
benefit.




Points Received: 4 of 4


Comments:



Question 17. Question
:


In December 2014, Max, a cash basis taxpayer, rents an
apartment to Kadeem. Max receives both the first and last months’ rent totaling
$1,800 plus a security deposit of $400. The amount of income reported as
taxable in 2014 is




$400.


$1,300.


$1,800.


$2,200.




Points Received: 4 of 4


Comments:



Question 18. Question
:


Which of the following bonds do not generate tax-exempt
federal income?




U.S. Treasury bonds


Bonds issued by fire districts


School district bonds


Bonds issued by cities




Points Received: 4 of 4


Comments:



Question 19. Question
:


Amanda, who lost her modeling job, sued her employer for age
discrimination. She was awarded $75,000 in lost wages, $25,000 for emotional
distress, and $150,000 punitive damages. The amount taxable is




$0.


$150,000.


$225,000.


$250,000.




Points Received: 0 of 4


Comments:



Question 20. Question
:


Linda was injured in an automobile accident caused by
another driver. Her son, Matthew, was in the automobile but not physically
injured. The other driver’s insurance company was required by a court to pay
Linda $75,000 to cover medical bills relating to her injuries, $30,000 to
compensate her for emotional distress attributable to the injuries, and $40,000
of punitive damages. Matthew was paid $15,000 to compensate him for emotional
distress attributable to his witnessing his mother’s injuries. What is the
amount taxable to Linda?




$30,000


$40,000


$105,000


$145,000




Points Received: 4 of 4


Comments:

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